By the way, I am impressed by the amount of gun powder you have. I think doing covered calls or selling puts shall serve you really well since you are willing to risk large capital.
The monthly premium will be small but quite significant if annualized. Taking WFC as an example. Its Feb $29 call is more than 3% at current level. As long as it doesn't drop below $25, you can keep writing every month. As you have a secure monthly cash flow, anything out of range, say low 20's can be bought with future flows.
I think this line operation shall be profitable in the market environment in the next few years ...
Generally speaking, your idea of writing covered calls and so on is brilliant. I heard most professionals play the market that way. But I am no professional. Playing the market is only my moonlighting. The kind of operations you described doesn't work for me. In addition to my die-hard long positions (I also swing a portion of those periodically), I play straight options for special events (e.g., bio trial results annoucements, FDA rulings on big drugs, court trials, ER), risking to lose all and aiming to gain 2-20X. Both kinds of end results indeed happened before and will surely happen ahead.
After last year's remarkable recovery from the lows, the market will correct downwards forcefully in the first half of this year, IMO. As such, I am sitting on about 75% cash, looking to build up puts positions (I don't short any stock for the exposure is too large to handle in case of wrong calls whereas the worst can happen with puts is I end up losing all). I made the right call last Thursday about JPM ER and closed my banks' calls positions. But my conviction was not strong enough to build up puts positions immediately. I needed confirmation (by JPM ER). At yesterday's open, I have already missed a 25-40% run in the puts I targetted to build. I only managed to open 1/3 puts in BAC and WFC, looking to add for their ER's next week. LVS and MGM were not volative enough to add. It is my first time playing with AMAG and I am always tame in the first hand of tradings.
Going forward, I would rather be late than wrong. Being wrong many times in the past before confirmation (i.e., making commitments too early) and lost a fortune each time. The most recent example is RMBS. My small calls position caught the news of EU dropping the antitrust case (being lucky as that was not in my DD expectation) and I closed that gaining 450% in 3 days last December. I went back the next day, building up a much bigger (fairly-sized) calls option for the price-fixing case vs Samsung, Micron and Hynix court opening. Right after I completed my calls position with 5 buys, the pps took a heavy beating. Realizing that I have made my commitment in one direction too early, I bought some puts. The court opening was indeed delayed for two days. But my puts started to go down violently too as the pps flatlined. I was harshly squeezed at both ends. Being fully commited, I could not do anything other than to see my brokerage account value going down a few thousand dollars every day. Finally, the anticipated big move down came last Wednesday. Seeing that, I closed my calls, saving whatever left. The puts started to move up huge but I did not have the conviction to leave a rather big amount of cash on the table to the last day of OE. I closed my puts last Thursday. I made many wrong moves in just one operation. Fortunately, the puts saved my working capital and I came out of that operation with a tiny loss. The court cases will take a long time to get resolved. This is labelled as a Top-10 tech court case of the decade and I will go back into it with both calls and puts. As the pps drifts lower, upside potentials are getting increasingly bigger and downside risks increasingly smaller, I will become increasingly biased towards calls. My position will reverse when the pps reverse.
I lost huge in SVA and am looking for a chance to get back in on the long/calls side for the 4QER.
Up to this point, I have mostly been on the long side of the fence. The Xmas period gave me solace to soul-search and reflect. From this point on, I am determined to play both sides of the fence. My time, energy and ability to search and research are all highly limited. I would greatly appreciate if you and anyone else could offer leads to stocks that are expecpted to move, eithe way. I don't want to look at stocks that remain flatlined for months/years. I want volatility. Only leads are needed. I will do my own DD.
Thanks in advance and with all the very best of wishes!
