I might be wrong and am just curious on others thoughts.
Buy 100 shares of AMC @ 4.66 ($466 up front), collect weekly premium around ~$30, average around $120 a month, ~25%ish profit
26% monthly return from covered calls on AMC
byu/BobbyJanson inoptions
Posted by BobbyJanson
7 Comments
Unless the underlying drops.
Unless AMC moons. You get screwed in either direction. Plus it sounds likes you intend to hold through expiration, which maximizes expiration risks. Say you write the $6 strike, AMC moves to $15 on expiration day, you get assigned and miss out on $9/share of gains. So you rebuy on Monday at $15 and AMC tanks down to below $5 by the next expiration. You got screwed twice.
Stay the fuck away from $AMC. You’ve been warned.
You could also just sell the $4 cash-secured Put (CSP) and get the premium. If AMC stays above $4, you keep the premium, and if it falls below, you get your 100 shares and can then sell your covered calls.
AMCs IV is huge because a recent huge move. But as amc stabilizes IV will fall, and fast. Your $30 premium this week may be $15 next week and less the week after and so on.
AMC is not a bad play, just realize the Greeks change quickly on meme stocks. Make sure you’re very comfy with you positions before opening anything.
Stock halves in that month. Only down 25%. Genius.
Selling covered calls on risky stocks can give spectacular returns, until the share price collapses causing big losses, which will happen at some point.