[Options] Public Service Announcement for Big Cap Long Stock Holders

Sean McLaughlin
September 2, 2020

If I was a long holder of big positions in $AAPL, $AMZN, $TSLA, $FB, $GOOG — any of the teracaps…. I’d be selling way OTM covered calls like a wild man here.#SKEW

— Sean McLaughlin, NLD 📈 (@chicagosean) September 1, 2020

Covered Calls is not a strategy we employ often at All Star Options, as there are better more efficient ways to use our capital to express similar bets.

But for any of you reading this who may be holding legacy long positions in stocks in the biggest names and highest flyers in the universe right now (think "FAANG" stocks, and your TSLA's and Zoom's and Peleton's, etc), we're seeing an unusual situation where many of these names are exhibiting skew that is resulting in options prices for upside calls being more expensive than downside puts an equal distance away.

This is a rare occurrence -- one that mostly occurs in runaway bull markets where every Tom, Dick, and Harry is screaming at the screens: "Get me in!!!"

If you find yourself in the fortunate situation of holding big positions (100 shares or more) of any of these stocks, the opportunistic trader in you should be considering taking some risk off the table and selling upside out-of-the-money calls in October or November expirations against your stock position to bring in some credits to cushion any reversals that may be on the horizon.

Yes, this will limit your potential upside. So, pick a strike price on the upside that you'd be happy to part with your stock that also offers enough premium to make the trade worth it.

When the ducks are quackin' --- we gotta feed 'em!

~ @chicagosean

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