The word “rules” is a bit harsh, but “guidelines” is too soft.
- Maximum premium is around ATM
- Buy-writes held to expiration have delta of 0 above the strike, -1 below the strike
- Don’t mess around too much with bid/ask spreads
- Don’t use credit / debit orders for covered call transactions unless it is a very slow moving market or if the spreads are unreasonable. Otherwise use sequential market orders. These orders are executed manually, and I suspect they don’t get too much priority.
- If the underlying drops, don’t bail–collect your full premium (not sure about this one)
- Ideas: time value approach to taking profits (e.g., 25% of premium 1st day)
- Ideas: Increase time in cash by bailing out with 90% of the premium (will this get me into the last day of trading anyway?)