19 December 2006

Reasons To NOT Chase Big CC Premium

I often see posts on the various forums about folks chasing extreme IV to write Covered Calls.

This is often not a very good idea. Why? Well despite being able to collect huge premiums, there is a huge amount of risk.

Check out this one:

It's Nuvelo Inc (NUVO) and this was a disaster for those chasing big premium.

Sometimes I'll have a go at these and play the IV crush when the announcement comes out, BUT with limited risk strategies.

CC's are Russian Roulette in this circumstance... trying to snatch a bone from a pit bull. A bad idea.

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