BOUGHT WFT COVERED CALLI'm looking at engaging a little bit of buying power here while I wait for volatility in the broader market to pick up without taking on a huge bunch of risk ... .
Bought 100 Shares WFT @ 5.78
Sold June 6 Put
Total Package: $518
I'll put in a GTC order to cover for $6.00, since that is what I would receive if called away at expiry, realizing an $82 profit/100 shares. If price is less than $6.00 at expiry, I'll keep the premium received for the short 6 ($60 or so) and will proceed to continue to sell calls against my stock in future expiries to further reduce my cost basis.
Coveredcall
TRADE IDEA: WFT JULY 15TH 4/6 SHORT STRANGLEThis is part of a small WFT covered call I'm working ... . The strategy here is to continue to reduce cost basis in the underlying shares. Here I'm doing it with a July 15th 4/6 short strangle in an attempt to sell premium while the implied volatility is still high ... .
Metrics:
Probability of Profit: 63%
Max Profit: $61/contract
Max Loss/Buying Power Effect: Undefined/~$50 (in this particular case, the max loss is actually governed by the fact that the stock price cannot go below $0, so the max loss is actually $400 (the short put strike x 100 shares ($400) minus the credit received for the short call $61 or $339).
TRADE IDEA: VIX "SYNTHETIC" COVERED CALLRecently, I've been warming up to "synthetics" a bit ... . They offer various advantages over the garden variety of covered call, not the least of which is capital efficiency, since they're generally cheaper to put on than regular covered calls and you get to "pick" the price of your "synthetic long stock" without actually waiting for that price to actually be hit.
In this particular case, I'm looking to go "synthetic covered call" in VIX. In an ordinary covered call situation, you buy the underlying stock and then sell calls against that stock in order to reduce your cost basis in the shares. Here, I'm buying a long-dated, far ITM VIX call to stand in as my long stock against which I will sell calls to reduce my cost basis of my "synthetic long." (As a side note, you can't buy shares in VIX -- only options, so even assuming I wanted to go covered call, I couldn't with this particular instrument).
Currently, the Sept 21st VIX 10 call will have a cost basis of about $1035, and the May 18th short call will bring in about a $455 credit, meaning that I will have reduced the cost basis of the long option by about 44% from the get-go. The debit you pay to put the setup on is the difference between the long call ($1035) and the short ($455). Between putting the trade on and expiry, I will repeatedly roll the short call out in time, collecting additional credit and further reducing my cost basis in the long ... . Naturally, the notion is that sometime between now and September, we'll see VIX north of 14, at which time I'll look at taking profit in the setup.
Here are the metrics (what there are of them):
Probability of Profit: Unknown
Max Profit: Unknown
Buying Power Effect/Risk: $580/contract; defined
Break Evens: Unknown
Notes: The reason why the prob of profit, max profit, and break evens are unknown is because you don't know how soon VIX might break 14, how many times you will be able to roll for a reduction of cost basis, etc. You may be able to roll several times before taking profit, but the amount of credit you receive for each roll will naturally vary as the credit received will be, in part, a function of price's relationship to the 14 strike.
