I always get a little concerned when someone says that 2 investing things are "the same". Maybe I just get too caught up in the details... Covered call (assuming OTM) means you do have some room for growth on the upside and it means you can be paid dividends (depending on length of contract it may be an unknown).
The dividends are factored into the price. Smarter people than you and I are arbing that. You can get it pretty damn close knowing what is going to be paid. OTM or in in the money doesn't matter.
A put has the same p/l as any covered position. So selling an ITM covered call is the same as selling an OTM put. Which is why idiots can make a lot of money over leveraging OTM puts. Most of the time it works fine.
The downside risk for both is the same, and in cases where the call gets executed they are at least very similar, however there is some slight different on the upside (yes, I know that dividends are taken into account for option premium, but depending on duration the dividend may be unknown causing some slight difference).
It's basically the same. You're trying to figure out 12.1345% vs 12%. You're calls are subject to early exercise also. So if your company decides to issue a 10 dollar dividend expect the call to be early exercised.
Please let me know if I misunderstand, however I am assuming you mean an uncovered call (you have done a great job simplifying things and you do specify "covered" later on so I assumed you meant uncovered here).
Correct. Buying a call and selling a put is synthetic long stock. It has the same movement as 100 shares of stock. Likewise buying a put and shorting a call is a synthetic short. That's the same as shorting 100 shares.
Personally, uncovered calls terrify me, although if you are dealing with a major index the realistic risk something that unexpected happening as a huge upside is almost negligible.
To a point yes. But earlier this year SPY ripped up and you'd have suffered pretty big loses. I won't sell uncovered calls on single stocks. Though at this point I don't really sell them at all. I don't seem to have any luck making money on them. The stocks I was selling CC on I'd have been better off just buying and holding. I'd be a head for a while and then usually the stock would make a huge move up. I've never come out a head long term on selling CC.
Yes, but the further out in time you go the premium/day drops. An ATM put 1 year out on SPY yields about 5.8% premium whereas if you did monthlies you would expect closer to 8% (8 came from a reasonable expected growth based on past growth and may be wrong).
Right but you also have other option greek values. If the market moves up a bunch and you sell your next monthly and the market tanks and stays down for a month you lock in the loss. The longer put option gives you time for the market to drift up. You are assuming you are going to win every time with the monthlies and you won't. What is more likely? The market will be higher in a month? Or the market will be higher in a year?
dollar cost averaging into a long position.
DCA loses 66% of the time. I don't like those odds. Can we time the market or not?
Fully agree about the mortgage. Always annoys me how generally accepted it is that a mortgage is not risky while investing on the stock market is.
My comment to how much housing went up after 2008 and the rental people is how much 5 /es futures went up as well. They leveraged money on the housing dip. You can do with stocks also.
People like "real assets". Stocks and options are abstract to most people. If the market is in the tank so is housing.