Replies to post #135985 on Biotech Values

[DewDiligence]

100% of the posters who post about selling covered calls claim they have made money on balance by selling them. It reminds me of the line from The Shawshank Redemption when Morgan Freeman tells Tim Robbins, “You’ll fit right in—everyone here is innocent.”

[GrthzGd]

By and large, however, covered call sales have made me money.

In line with the horse betting adage that sure things make bettors more (or lose them less) than long shots--on average and over the long run.

[wallstarb]

While I actually don't normally write or sell covered calls - they can be a very good way to generate "income" from an area where there are seldom any dividends. Also it makes sense to sell calls especially if there is very high volatility priced into them (implied vol). 99% of the time you won't have a company buy yours out of the blue so this is the exception rather then the rule - but as we all know many times there can be unsuspected binary events like trial data or some partnership that causes big spikes from time to time especially in the biotechs - so I understand Dew's initial point.

I generally don't like to be short any options - I like to be long cheap options (hence my propensity for cash rich biotechs which essentially are cheap options with a theta (decay) of the burn rate, and hopefully some dog in the pipeline has some good news before they run out of cash and need to dilute the common.