A weekend went by, and I was still feeling that I was a rather smart oatmeal cookie about writing my deep ITM call. Really, it takes a lot to say an oatmeal cookie is smart though. The following week, I found another company that had strong growth, good fundamentals, and a stock that just looked like it wanted to go up just for me.
I bought 100 shares of MEA, and wrote another deep ITM call for 5.10. Again, the delta on the call was 1.000, and the call was a month out so there were only pennies of time premium left.
I can say that there is a strategy for trading deep ITM calls, but I wasn't doing it right. You have to be trading more volume than 1 contract to make any meaningful profit. Also, selecting the correct stock is difficult, and probably the best bet is some nifty-fifty software that costs 10 fold what its worth.
Conclusion: first time options traders, your broker may limit your ability to trade those spreads, naked puts and what have you, but there are still places to screw up. Level 1 doesn't mean risk free; in fact, your covered call P&L graph will look something like that of a naked short put.
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