Man, I debated it and debated it, but decided to sell a covered call on AAPL on Monday, see my Greed post. I was planning to wait until after earnings came out on Wednesday, but got spooked on how I was loosing on NYX. I covered, luckily OTM. Since then AAPL hasn’t looked back and I ended up leaving $500+ on the table. I considered waiting because I thought they’d beat earnings, like last quarter, which they did. Last time around, I did the same thing and like this time I’m pocketing a nice profit, which could have been more. That’s the downside of covered calls. They treat me right on most trades, but every so often I get smacked with a feeling of regret that I could have made more. The bright side is that at least I bought my April AAPL call back and will have an extra ~$800 in two months from the transactions.
To me, that’s the big lesson to remember if you are planning to write covered calls. You can’t get bogged down on a missed opportunity here or there. You have to remember it’s the big picture that matters. If I consistently left money on the table with covered calls, I’d stop selling them and start buying them or at least just buying the stocks and not selling options on them. We’ll see how the next couple of months role for AAPL (my cc expiration is in June) and then I’ll be able to tell if my premiums received were greater than my potential gains had I not sold the covered calls on all underlying stocks. So far this year, my premiums have killed any possible gains I would have made without writing the calls. Even when AAPL beat earnings last time, it came back down below my strike to let me finish OTM and I kept the entire premium. Last week the AAPL call was less than $1 ITM and I bought it back for a good gain. I doubt I’ll be so lucky this round, but that gives me the oppotunity to bank on that trade being called away and I can sell another naked put using that expected sale as the backer. This is where my trading model gets flexible. A covered call or naked put beyond reasonable likelyhood of being part of my portfolio at expiration becomes more capital for me to work with, thereby reducing the cost of leaving that money on the table. Make sense?