I've never done calls/puts.
Could you kindly outline your thinking (numbers would be nice such as cost of calls, etc.) on why you did what you did and what can happen i.e. the cases if utilities go up, down or stay the same.
Thanks.
Well kind of difficult to explain in a post. I trade options regularly usually buying to open to augment a position I am long on or to hedge a position before earnings.
I also write calls and outs to generate additional cash flow. Utilities are always an early indicator of interest rate direction and so I am very comfortable writing calls against my positions with the goal of collecting about 1% in premium for a less than 30 days of decay and a strike price roughly 3% greater than my current price. My expectation is to keep the additional 1% premium for myself and not come near the strike price during that 30 days. Sure if I am confident my holdings are under pressure, I could sell them, incur the taxes on the sale, and miss dividends while waiting to buy back in at a lower price, but here I avoid the taxes, keep the dividends, and cushion the downturn.
if naked, it’s the same goal but I don’t own the underlying position so if I was in the money on the date of expiration I’d have to buy shares to surrender. If out of the money I’d just keep the premium.
if it’s a position that I am approaching a price where I can average down my purchase price I will start writing puts for a lower strike price than what is currently trading, collect the premium, and be pleased even if I am in the money on expiration because it’s a stock I don’t mind owning more of. If I am out of the money, great so I kept the premium.
on some more aggressive investments I will sometimes buy both the call and the put for the same strike before big news comes out and the exponential gains from a dramatic move in either direction will profit enough to cover the cost of both positions and still leave me a healthy profit.
options are a wonderful way to fine tune a portfolio but not all equities have a robust options market and it can be a bit of work to keep an eye on all of your positions.
during dramatic downturns like what we experienced 2 years ago I will go heavy on LEAPS which are long term options to maximize exposure to quality companies that I expect will bounce back within the next 18 months. I minimize my exposure to losses and maximize my exposure to gains.
there is more to it but that is a basic framework of what I like to do.