Bought an AMZN LEAP ATM, When can I start selling calls against it?
By - Alien8w8
Pfff I've been making bank selling PMCC against .6 delta Abnb LEAPS. Sell .1 delta weeklies and you'll still take in a few k a month with AMZN.
Covered calls collateral would not be the number of shares if LEAPs were exercised? I do not understand how that has to be trasferred to money equivalent.
You wouldn't be margin called. All that would happen is if the short moved against you enough you would have to sell your long to close the spread.
I have had it happen to me before where the short is appreciating in value faster than the long so you are losing money on the trade. Not as scary as you would think.
> what are the downsides of if I start selling covered calls against my current position at .6 delta?
Understand how delta changes over strikes for each expiration. Short answer is delta is more 'squished abround the UL price as the expiration approaches. sooooo on a typical calander on the same strikes, the far position will dominate the positive deltas.
If you start your short at 0.6 deltas, assuming the price does not chage, it will by definition drift to 1.00 deltas as expiration approaches. You need to understand that fact.
That will also shift your calendar deltas because each leg will be pulled at different times. You also need to understand that.
if it is assigned you lose your extrinsic value. But if make sure that Short strike - Long Strike > premium paid, you'll make money on the trade and if that amount of profit is worth your risk then cool sell the spread.
If you get assigned you make less profit
How are you selling calls against a LEAP? Is this naked? This is something that always confuses me about PMCC. Plz halp
It’s not naked, it’s just a diagonal debit spread. Owning a call gives you the right to right to buy 100 shares at a set price by a certain date. With that as collateral, you can sell a call with a higher strike price and a nearer expiration date and be ‘covered’ in an indirect sense.
So you can sell a call based off of another call you already own?
I guess what I'm saying is do you need to own 100 shares? Or have the cash set aside to do so?
The leap is collateral. Even if the price moons, you have the right to buy at your LEAPS strike.
So I tried doing this with CHASE and it won't let me sell a short term called. It's saying I'm not allowed to sell uncovered options. Even though I own a LEAP on the same stock. What am I doing wrong?
Cash set aside to secure (cover) a sold put.
Shares to cover a sold call. You cant use cash to cover a call because the risk is unlimited.
You can also cover a sold put or call by buying an equivalent contract. The profit and risk is decided based on the difference in strikes and expiry.
Look up iron condors if you can wrap your Head around that this will all make sense.
You buy atm/itm leap n sell calls otm. So if you get assigned you’ll have lower price to excerise to get the 100 shares