In response, you're right about the capital required. But if you want a near no worry trade that very well could net you better than 5% a month, that's the deal you have to work with. Try compounding 5% a month over a year. I bet very few here are doing that a year. And with little to no trading or risk.
The cost of commissions is not a concern because I do trade with IB. I don't know why anyone else doesn't. It's amazing people pay minimum ticket charges anymore. OptionsExpress charges I think a minimum $29 for this. What a joke.
You're right about the risk on the downside. But that's just the covered call portion. That's why you follow the trade with the possibility of getting into a protective put if the need arises. That then minimizes your risk all together. If you get in cheap enough, the premium you got from selling the call pays for the put and makes the entire trade risk free. But the purpose of the put is to add even more money to your account on the downside to further lower your cost basis on the stock. Then you bail on the put when it turns and ride the stock up with that lower basis.
Just sit back and watch how this MRVL trade ends up playing out. I've run some tests on this myself and have figured that I could end up taking this trade to a better than 300% gain by the end of the year just rolling the shorted calls and puts on the stock I own without any margin. I think I can do this because I know how to pick tops and bottoms on a stock fairly well. At least close enough to be able to time the option trades.
I'll post the trades and net results of where the trade stands at all times here as it goes. I think there will only be a few adjustments a month.
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