If there is a stock with a catalyst coming up that the market believes will increase the stock price (such as good earnings), option premiums are usually high. If there is a stock that is trading around $30 a share and August $35 calls are selling for $1000 a contract, what is the downside of buying the stock and writing a covered call? It seems like an easy, low risk way to make 50%. The only possible scenario that is bad is if the earnings miss badly and the stock drops, but even then, I already made the premium and the stock would have to drop below $20 a share for me to get into a loss (which I would plan on holding the stock anyway). Yes, I could also miss out on potential profits if things are good, but I would be happy getting out at $35 with the premium. Am I missing something? Tell me I'm wrong before I do something stupid!
Edit: The numbers are without fees btw.
Submitted May 12, 2017 at 03:46AM by Ksquared1166 http://ift.tt/2q8pEr8
