A warning about trading covered calls.

There is no magic in harvesting the time value of covered calls. In order to make money trading covered calls you need to consistently open your positions when the stock price is relatively higher, and close them when your stock price is relatively lower. If you don't do this you can do no better than break even vs just holding your long stock.

And of course if you are opening your positions at relatively lower stock prices than you are closing them at, you are paying money to engage in your covered calls program.

I became very interested in options based strategies a few years ago and ran a lot of monte carlos many using actual stock price time-series (and monte carlo on the options strategies). And the thing that stood out is long is long, short is short, and you only make money on long trades when you open low and close high, and you only make money on short trades when you open high and close low. Remarkable how reliable gravity is.

R:

Berkshire Hathaway FAQ

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