Covered calls on volatile underlyings is a VERY bad idea.
Yes, you get a higher option premium when trading activity increases.
But you have the full downside of the underlying but a capped upside. (because you are selling calls)
So if it goes down steeply, you take 100% of the downside, if it goes up steeply, you only take a fraction, the higher the yield, the closer the call is usually to the strike, the less upside you have.
So if you want to use a covered call strategy, then preferably on a basket that has low volatility, such as $JEGP 😘
Yes, you get a higher option premium when trading activity increases.
But you have the full downside of the underlying but a capped upside. (because you are selling calls)
So if it goes down steeply, you take 100% of the downside, if it goes up steeply, you only take a fraction, the higher the yield, the closer the call is usually to the strike, the less upside you have.
So if you want to use a covered call strategy, then preferably on a basket that has low volatility, such as $JEGP 😘
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@TotallyLost That's exactly what I wrote😁 That's the "catch" or the risk you take.
If it goes down sharply, it can take a long time to break even again.
But of course the dividend tastes good😋
If it goes down sharply, it can take a long time to break even again.
But of course the dividend tastes good😋
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•@stefan_21 that is not a dividend 😜
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•@TotallyLost Okay: But the "dividend" still tastes😋 -> so better?😂
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@stefan_21 yes, something. 😅
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@TotallyLost Wellaaaaaa
In the end, it's only a bad idea if you don't align your investment with your own expectations.
If you expect +-10% and high vola for MSTR, then it fits. 👍
In the end, it's only a bad idea if you don't align your investment with your own expectations.
If you expect +-10% and high vola for MSTR, then it fits. 👍
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@TotallyLost define "bad"
I would say "funny"
and if he then really reinvests 5% of his assets I change to "expensive"
so no matter what you decide, max drawdown, risk or potential return, just buying $MSTR makes more sense.
Or as you say BuyWrite on something boring if you want the cash flow
I would say "funny"
and if he then really reinvests 5% of his assets I change to "expensive"
so no matter what you decide, max drawdown, risk or potential return, just buying $MSTR makes more sense.
Or as you say BuyWrite on something boring if you want the cash flow
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•@leveragegrinding you can compare the dividend yield/distributions of MSTY and JEPG :)
If I implement the plan (future idea) and invest a small portion in the MSTY in addition to my Bitcoin stack, then purely for the monthly cash flow, which - at least in the past - was brutally high.
However, it should hopefully be clear to everyone that you can't get 5-10% per month without risk.
If I implement the plan (future idea) and invest a small portion in the MSTY in addition to my Bitcoin stack, then purely for the monthly cash flow, which - at least in the past - was brutally high.
However, it should hopefully be clear to everyone that you can't get 5-10% per month without risk.
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