Poor Mans Covered Calls versus Covered Calls (Which is better?)

[@StockandOptionMyLifeOfLearning]

►► AVAILABLE NOW! Limited to the FIRST 100 people, get my brand new online Option Trading course (Intermediate option trading) for $497. Regular price is $997. Here is the link to check it out: mylifeoflearning-randy.mykajabi.com/offers/EgeavtWJ Join my Patreon to get access to my all my Stock & Option Trades, Open Orders and Weekly Top 5 Stocks: www.patreon.com/mylifeoflearning Subscribe to this Channel: kzbin.info New Beginnings: The Option Trading Story amzn.to/2OgXx58 Facebook: facebook.com/jamiston.queens.5 Website: mylifeoflearning.com/index.html

[@BestStockStrategy]

Great video! I prefer PMCC because they are more capital efficient than owning stock outright. Plus, there's downside protection with the long call, as your max loss is the premium that you paid.

[@StockandOptionMyLifeOfLearning]

Thank you for that David and for your support!

[@GodArmy7711]

But wouldn't slapping a stop loss on a long call provide the same protection??? Someone please help me understand the point of a poor man's covered call. 😫

[@StockandOptionMyLifeOfLearning]

It could provide some protection. Or you could set an alert triggered if the underlying reached a certain level or the value of the LEAPS long option that you own reaches a certain value. Here's the whole video series I made on PMCCs and LEAPS options. I think it'll help you understand them better: kzbin.info/aero/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7

[@williaml9570]

I have not watched all your videos, but this one spoke to me because you showed trades you are/were in that are much more realistic for us regular folks to relate to. You didn’t talk about 10 Apple contracts, you talked about one.

[@StockandOptionMyLifeOfLearning]

Thank you for that! 😊 I appreciate that feedback.

[@taylorwright7344]

Great video Randy! Appreciate the refresher on delta when working with PMCCs

[@StockandOptionMyLifeOfLearning]

Thank you for your support Taylor! 👏

[@domingodelgado3944]

Can you do a video on how covered calls would work in a bear market Randy? Or your strategies during those times to still generate income?

[@StockandOptionMyLifeOfLearning]

Hey Domingo thank you for that suggestion! I think that's a great idea to do a video just on the subject. I have discussed it in other videos. Here are a couple of them if you'd like to check them out: kzbin.info/www/bejne/l3yQn4OOj5abd6M and kzbin.info/www/bejne/baSXmpShft53hLM.

[@samwalker3441]

Hey Randy. Love your videos. Thanks for breaking the option stuff down to the basics. Please keep the content coming.

[@StockandOptionMyLifeOfLearning]

Hey Sam thank you so much for that and for your support! I really appreciate you! 😊

[@markmilam4297]

Thanks Randy for an excellent description of the differences between PMCC's and CC's. I really appreciate the way you always take real examples of trades that go in your favor and also ones that go against you. Trading options to me seems just like solving problems. They're simply puzzles that the more knowledge you possess about them, the easier it is to make them profitable. And as the way with many problems, there is more than one way to solve them, albeit one of the ways might be better than the others. I enjoy learning from you! Please keep up the great work!! We've had a tremendous January and looking forward to the months to come!!

[@StockandOptionMyLifeOfLearning]

Hey Mark thank you so much for that! And that was very well said! 👏 What you described is one of reasons why I think I and many other option traders enjoy it so much. It’s a mental challenge that if done right, could be very financially rewarding. January has been our most profitable month over the past year. I was looking at the numbers the other day and was surprised at how good as it was. One more trading day. Maybe we can get in another trade or two to make it even sweeter…

[@markmilam4297]

@@StockandOptionMyLifeOfLearning Sweeter is always a great thing!! I'm ready for the last day and new month to come!!

[@manpreetsingh25]

Very informative video 👏 I like your excel sheet. Do you edit/add columns manually after exporting from interactive broker.

[@StockandOptionMyLifeOfLearning]

Can you give me the timestamp you're referring to please? I want to make sure I answer your question accurately.

[@manpreetsingh25]

@@StockandOptionMyLifeOfLearning 1:34 I wanted to create similar excel with my positions. I also use interactive broker so I was wondering how to create excel. I know you can export position into csv.

[@StockandOptionMyLifeOfLearning]

That Excel spreadsheet is something I created on my own. It's one of several spreadsheets I make available to my patrons (www.patreon.com/posts/53254442) and I'm in the process of making my spreadsheets available to the general public on Etsy soon. Hopefully I can get that done in the next month or so.

[@StockandOptionMyLifeOfLearning]

Join my Patreon to get access to my all my Stock & Option Trades, Open Orders and Weekly Top 5 Stocks: www.patreon.com/mylifeoflearning Subscribe to this Channel: kzbin.info New Beginnings: The Option Trading Story amzn.to/2OgXx58 Facebook: facebook.com/jamiston.queens.5 Website: mylifeoflearning.com/index.html

[@theeverydailyshow]

Hey Randy, did you ever have a follow-up on what you did to possibly adjust the cc on aapl (see minute 8:11)? If not, how did things play out since then? Thanks

[@StockandOptionMyLifeOfLearning]

Hey Chris if you’re referring to the position where we have sold a cash secure put and also have a PMCCs in AAPL, we are still in that position and have rolled and adjusted it multiple times since then.

[@theeverydailyshow]

@@StockandOptionMyLifeOfLearningI assume always as a credit. 😃 Did you adjust the leaps call or just the csp, or both? Just curious how you managed the positions since that video. Thanks Randy.

[@StockandOptionMyLifeOfLearning]

Yes it’s always for a credit. No we have not adjusted the LEAPS call yet. Just the near term short call and put. We do have it on our to do list to adjust the LEAPS call by rolling it out another year.

[@sebastiendurand9367]

Is there a benefit in matching largest volume open interest when selling calls or puts?

[@StockandOptionMyLifeOfLearning]

As a general rule, it’ll be easier, quicker and produce less slippage if you trade in options that have higher open interest. However, personally, I’m willing to trade in lower open interest with the use of limit orders. I’m also willing to let those positions be assigned to us if we can’t get a decent fill price when we are looking to exit or roll those positions.

[@luigiscarano1671]

hi, in classic CC's you know your cost base just sums the credit and the price paid for the 100's stocks, in PMCC do you have some tips to calculate that? because we should know the future value of the long contract for the strike you are willing to sell. thanks

[@StockandOptionMyLifeOfLearning]

I'm not sure I understand exactly what you're asking, but when you do a PMCC you know how much you paid for that call option upfront. You also know the Delta starting out, but that will change as the position progresses. However, if you want to be as certain as you would be with a covered call, you could always buy a DITM call option whose Delta is really close to 1. That PMCC would act very similar to a covered call position.

[@luigiscarano1671]

@@StockandOptionMyLifeOfLearning thanks, but i mean in term of cost basis, in a CC we calculate just summing all the operations and tried to avoid to sell a call below the cost basis, how do you do in a PMCC?

[@StockandOptionMyLifeOfLearning]

I view the cost basis as whatever the LEAPS call option cost that I bought minus whatever credit I've collected.

[@cjchamp3]

Great video. Just keep in mind that you only lose less with a pmcc when you keep the difference between a covered call and pmcc in your account as cash. If you don't you will quickly realize you lose much more due to the leverage you took on in your account.

[@StockandOptionMyLifeOfLearning]

Good tip!

[@richardfrench2863]

You should keep at least 50% of the holding in stocks themselves. Otherwise, in a full out crash, you will zero left vs 50%.

[@cameronvincent]

@@richardfrench2863 depends on the VIX if the vix is high you want to be 50/50 When it’s under 20 like 30%

[@dwightminor5792]

On the long leg can it be deep out of the money or does it HAVE to be in the money?

[@StockandOptionMyLifeOfLearning]

Which trade are you referring to?

[@dwightminor5792]

@@StockandOptionMyLifeOfLearning buying the long call option in the PMCC. For example buy the 1/20-23 240 call on PEP and then sell calls against that. It would require minimum capital .04-.50 bid ask. PEP currently at 162.21.

[@StockandOptionMyLifeOfLearning]

Sure. You just want to be careful if you sold a call option below that 240 strike that you own. Technically that’d be a spread so you wouldn’t PEP to go above your short call strike price.

[@dwightminor5792]

@@StockandOptionMyLifeOfLearning ohhh got ya thanks! That makes more sense haha

[@dipu827]

Hi Randy, need your help with one doubt. If a leap bull put credit spread is deep in the money way before expiration (say month or two months). Can I still be exercised? Thanks in advance

[@StockandOptionMyLifeOfLearning]

I think all your questions about assignment will be answered in this video: kzbin.info/www/bejne/iKO6dqSaorqMhas If not, just message me.

[@dipu827]

@@StockandOptionMyLifeOfLearning Thanks Randy as always.

[@jg5479]

How do you decide to either try and roll out for the same strike for possibly a small credit a month or couple months out and funds tied up for that amt time, roll out and down for a decent credit but funds tied up for many months or just except the shares when the share price is trading well below your strike. And if share price is a decent amount away from you strike you bought in at do you sell a cc at your strike for very little premium or wait for a bounce and try for more? I sold the 175 February 18 3m puts when trading at around 181 late January. If price remains where it is i will probaly except the shares even though i will miss the ex date for dividends instead rolling out. And if i accept the shares, was trying to figure out where and how far down to place a cc if assigned shares if 3m is trading in this area or lower when assigned. Thank you

[@StockandOptionMyLifeOfLearning]

That’s really too much for me to answer in a comment because there are a lot of factors that go into making that decision. Let me directly to a few videos that I think will help guide you: kzbin.info/www/bejne/l3yQn4OOj5abd6M and kzbin.info/www/bejne/bJXXk3ekpcuofa8 and kzbin.info/www/bejne/mme7apd8q7KEnrM and kzbin.info/www/bejne/majSooVrm7N7oaM and kzbin.info/www/bejne/mIGQepeLh9t7iMU

[@johnchang1226]

Recently learned about an ETF QYLD which yields 12% p.a. it's employing a covered calls strategy on the Nesdaq 100 index. Isn't it a good idea to pay the fund manager to do all the portfolio monitoring job for us?

[@StockandOptionMyLifeOfLearning]

If you don’t really have the time or desire to do what we do and are willing to accept an overall lower long-term return, I believe QYLD could be used as a part of a trader/investors portfolio. However, because were picking specific stocks at specific entry points and are able to roll each individual position or close it out based on its individual price action and not just as a blanket blind rule, we overall do better than QYLD. If I ever reached a point where I just didn’t enjoy doing what I do and was willing to accept a lower return, I would be open to putting part of my portfolio in an ETF similar to QYLD. I think it’s it fit for some people, but definitely not everyone.

[@richardfrench2863]

You ain't getting much for that vig. They are mechanically rolling that out every month. No mid week or mid month adjustment, no buy and roll up and out. when the market goes up, will be capped. When the market goes down, you will NOT be capped, you will take those loses.

[@KpxUrz5745]

For starters, I would be put off by the 30% down bath that QYLD has taken this past year.

[@sf2189]

The issue have with PMCCs is that it most people buy them to substitute for underlying they cant afford so it gets your portfolio out of whack. If you have a $100k portfolio and you decided that you want 20 positions of $5k each. You could spend that $5k on a PMCC but because the stock might be $20-40k - the risk is way too high for the portfolio.

[@StockandOptionMyLifeOfLearning]

You make a good point. PMCCs can be used in a dangerous way. Thank you for sharing that!

[@richardfrench2863]

You can't ( or shouldn't) go over 50% in options in your account.

[@GodArmy7711]

But wouldn't slapping a stop loss on a long call provide the same protection??? Someone please help me understand the point of a poor man's covered call. 😫

[@StockandOptionMyLifeOfLearning]

It potentially could. Or you could also set an alert triggered if the underlying or your long LEAPS reaches a certain value. Here's a video series on PMCCs and LEAPS options that I think will help you out: kzbin.info/aero/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7

[@GodArmy7711]

@@StockandOptionMyLifeOfLearning You sir, are the man. Thank you!

[@SuperInsuranceman]

Okay, but as the goal is to lose as less money as possible an PMCC is the best option because you never know if the stock will tank to zero or not so it's always better to buy back an deep ITM naked put and to transform this one in an PMCC. An paid dividend from any stock is not an argument here to get in an long stock if you want to protect your trading capital.

[@StockandOptionMyLifeOfLearning]

Thanks for sharing your thoughts

[@andreassmidelov]

Wait hold up..... So, with a PMCC, the long call doesn't actually cover the short call? Then it's not a Covered call. Just a Naked call :O Wouldn't the margin requirement be nasty if that short call is considered naked? I assumed the PMCC worked because it would temporarily be considered a Call Debit Spread, so you'd lose the long if the short was excercised. I'm guessing it's not considered a spread because they're on different expirations?

[@StockandOptionMyLifeOfLearning]

If the long LEAPS call you own strike price is less than the one you sold, most brokers will let the long one cover the short one. If there’s a specific time stamp you’re referring to in this video please send it to me so I can answer you question accurately. If you haven’t seen it, here’s a video series I made on LEAPS and PMCCs: kzbin.info/aero/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7

[@andreassmidelov]

@@StockandOptionMyLifeOfLearning Thanks, I'll watch your other videos :) Yeah I was reacting to your Apple example at 5:30

[@StockandOptionMyLifeOfLearning]

In that position, our long LEAPS call covers the short call because the long call's strike price is lower than the short call option that we sold.

[@andreassmidelov]

@@StockandOptionMyLifeOfLearning Yeah that would be what I was expecting as well, but in the video you say the opposite? In the clip by the 5:45 mark, you say 100 shares will be called away, leaving you with a long call option and a short 100 share position of Apple. If the long LEAP covers you, that shouldn't happen, right? You would just lose the LEAP option instead?

[@StockandOptionMyLifeOfLearning]

No the broker won’t automatically assign the LEAPS call you own early just because stock was called away from you. Unless it’s at expiration, you’d have to request early assignment if that’s the route you wanted to take.

[@williamdieffenbach3264]

The winner is covered calls, you get dividends

[@StockandOptionMyLifeOfLearning]

Thank you for sharing William! I love getting those dividends too!