Unfair Call

Discussion in 'Options' started by traider, Nov 28, 2021.

  1. traider

    traider

    The calls that I sell are underpriced due to skew. I find this unfair. This makes covered call strategies unattractive. What can be done to improve this?
     
    qlai likes this.
  2. thecoder

    thecoder

    Last edited: Nov 28, 2021
  3. 2rosy

    2rosy

    Buy them
     
  4. That's the good thing about a two-sided market; if you think it's "unfair" on one side, simply take the other side of the trade. But I suspect you'd complain about it being "unfair" when you lose there, too... :)

    Prices in the market are not "fair" or "unfair"; just like the color of the sky can't be right or wrong, they are what they are. If you believe the asset is mispriced to one side or another, that's either a trading opportunity or a way for you to find out that your perception is wrong - so you'll either make money or learn to refine your view on the market (although you'll pay for that knowledge.) But assigning human or moral characteristics to prices is a priori wrong, and will screw up your trading if you stick with it.
     
    VicBee, FSU, easymon1 and 1 other person like this.
  5. qlai

    qlai

    Short stocks, sell puts to cover (and sell calls for a kicker - kamikaze style)
     
    JSOP and thecoder like this.
  6. LM3886

    LM3886

    Is it options of an index or a stock?
     
  7. newwurldmn

    newwurldmn

    I know a market maker who will happily pay more than the market for out of the money calls.

    he makes his money on volume.
     
  8. JSOP

    JSOP

    Just like what @qlai said, you can sell put + sell stock to do a box or you can also do a vertical put credit spread so that way you reduce the risk of being short squeezed on the underlying in case the price of the underlying takes off
     
    qlai likes this.
  9. JSOP

    JSOP

    OP mentioned covered call. I think it's an option on a stock.
     
  10. LM3886

    LM3886

    Makes sense. Although it might also be index ETF options where the skew makes covered calls unfavorable.
     
    #10     Nov 28, 2021