Is there possibly a mistake in your calculations?
Saul,
There may be a mistake in my calculations. I am selling options in conjunction with buying shares in GOLD so I probably need to consider the added risk in the calculations. I also just started last week so I don’t think that I’ve given it enough time to see how well it will work. The following risks going off topic so we should probably stop this thread (and maybe I shouldn’t have mentioned it in my update).
The assumptions behind the approach are the following:
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GOLD (a gold mining company) will track well the price of gold.
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Gold price is unlikely to crash (and maybe will do as well or better than the US Dollar).
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The weekly premium of selling at the money straddles on GOLD are around $1.30 on a share price of $26.50 so this is 4.9% of the value of the shares. Since this $1.30 premium is all time value that will decay in a week, it can be harvested. Then repeated each week. Since I am taking on risk by selling the put component of the straddle and since I do not sell options against my entire GOLD position, I think the weekly return will be less than 4.9% (maybe 1-2%).
Note: I have been using a similar approach with ZM and CRWD. The weekly premiums on CRWD have been around 6% per week lately and around 8-9% per week on ZM (they were as high as 15% per week when ZM was trading at around $150 in May!!).
For example, CRWD is currently trading at $102 per share. So 100 shares cost $102,000. You can currently receive the following premiums for selling 1 CRWD 10Jul $102 call and 1 CRWD 10Jul $102 put:
call: $3.70/sh x 100 shares = $3700
put: $3.80/sh x 100 shares = $3800
So $7500 / $102,000 = 7.35% but this is for a week and 2 days. Of course there are risks and this becomes a money losing trade if CRWD drops below $94.50 or rises above $109.50 on July 10th. But there are ways to compensate for this risk should the shares start to move a lot in one direction.
Again this is off-topic so please don’t reply.
Chris