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Comment by jeffbee | Hacker News Reader

OK but this is not exactly risk-free. You are on the hook for the downside risk of whatever you own behind those calls. Selling covered calls comes with a lot of exposure.

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it’s safer than just holding stock which is what 99% of people do...so how is that more exposure than your average long retirement account?

Well yeah. Obviously :-)

OT @ tempsy: I need to say thank you. I found WSB through a random comment of yours about Tesla/WSB in January 2020, read a lot about options, liquidated my portfolio in February, bought puts on SPX and DAX and made €400k after taxes in a few weeks.

It's kind of crazy that your random comment on HN lead me down this path. That's why I'm a reader of HN since 2008 or so – exposure to randomness ;)

I'm not able to follow the logic. Why is it safer? Isn't the exposure from the options additive to holding stock?

Yes the exposure is much worse. If you are long a stock you can sell it whenever you feel like it is about to lose value. When you sell covered options you may be forced to hold the stock until the contract expires. That’s the whole point of the call: the buyer pays you the premium and in exchange you are taking all of the risk for the duration of the contract.

You can actually buy the call back whenever as long as someone is selling (which market makers generally are) to exit the position - you don't have to wait until expiration.

no it’s not. i’m talking about covered calls which is where you sell a call against your shares. you collect the premium from the option in exchange for potentially limited upside if your sold call goes in the money at the time of expiration.

What do you mean? If the call doesn't finish ITM, you collect premiums. If it does you're only missing on the upside. You don't make as much money as you could have, but either way you make a profit.

Or is that not how it works? I've never written my own options.

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