Another example of how I

    Posted by jroger on 15th of Jan 2021 at 03:58 pm

    Another example of how I am investing in metals with covered calls.  You can see how the clalls reduce loss as the underlying security declines.  Now, one could say that I could just follow Matt na Steve and sell at the top and buy at the bottom, good point.  I have never been able to devote enough attention to successfully do that. Every time I have sold metals I have either sold too soon or failed to buy in again before the price exceeds where I sold.

    So, Options.  My example still shows a profit due to a combination of laddered buying and writing calls at a bit higher price.  It is a balance of expectation of price increase and income for sufficient protection to the down side to make holding the stock attractive.  Lots of judgement calls here which is the challenge. 

    In my example, what you don't see are the previous months buy/writes I profited from and which help make the strategy attractive.  Now, could the price of GLD decline enough to make me wince, sure. But that can easly happen and be even worse by just holding stock and not being a trading wizard.

    Next, now that some of my positions are expireing, I have been and will be writing calls to replace them. With the price low here, I tend to increase the ratio of stock to calls so I don't lock in losses for stock which is under water but still have some income to protect from more downside. As I say, more judgement and often there is no right and wrong answer except in the rear view mirror.

    Good Luck


Subscribe to our email list for regular free market updates
as well as a chance to get coupons!