This is why I give up on some of the extra profit when I write my calls.
"Based on today's closing prices ($6.67), I calculated my take on selling an out of the money call. (Nov $7.50)"
The stock is down to $6.02 right now. For the stock you bought, you are down $0.65 per share from where you bought it. If it closes right here, you earn the premium on the option, but the stock is down $.65. For me, the stock is exactly the same as where it was the other day. At my low $5 selling price that paid $1.91 premium. It didn't go down for me. The option, which i sold not bought, is down in price. But the stock is still worth exactly $5 to me. Yes, $0.65 of your profit has shrunk. None of mine has shrunk.
Both philosophies work, at different times. i LIKE your way of doing it, and when the stock was at $2.75 I sold a large amount of $5 calls, just waiting for it to go up. But at this level, I mentioned that I sold out for my third time and took profits. (post 693. I said the stock was as high as I thought it should be, and I sold) Then, I did the covered calls in the money because the stock still should stay above $5 IMHO, and earning 9.22% in 2 months is still pretty good, especially on a stock I think has run its course and is finally fairly valued. If it drops some, which it has been doing, I'll still make my 9 - 10% and move on. My risk is much lower.
At times, when I am bullish, as I was then I first bought at $0.72 and $0.99 per share (in the same day. It moved that much on the initial news from China), I was writing $2.50 calls at that time. I write out of the money (OOTM) calls when I am bullish, but when a stock has reached a good level, and I am NOT bearish, but also not as bullish, I go with the in the money (ITM) calls. At over $6 a share, I felt it was time to sell (see my post 692, when I said I sold. I put it up there, not saying it now after the fact) and the ONLY way I would own this stock this high was an ITM call. Because I like it at $5, and would own it, and I also think 9.22% in two months is better than most of my other plays and what they are paying. I did a bunch of PLAY yesterday, also ITM, and IONQ also ITM. Just not as bullish as I was, with the overall PE so high, the news coming out, the lack of more drops from the Fed, etc, etc.
Bottom line. If the stock goes up, yes, your OOTM calls will give you more profit. But since I am now neutral on the stock, I did the ITM calls. Still up the exact amount at $6.02 as I would be at $6.67. ANd my breakeven before I can start losing money is $4.58, which I like.
Later. Have to deal with some issues in Miami, so out of commission for a few days. LOng flights across the country both directions.
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