Hi Mark NG,
You say that you use Covered Call by Writing slightly ATM. I will appreciate if you can explain why is that strategy is better than writing OTM? Why do you think I said it was 'better.' I never said that and I don't believe it to be true. It's better for me. It suits my risk profile better. It gives me trades that allow me to trade within my comfort zone. Your comfort zone is obviously different than mine.
Surely writing ATM will guarantee that your stock will be assigned and you have made no Capital Gain. This statement shows you have too little understanding of either the stock market or options to be trading options with real money yet. First, you seem to believe that stocks never go down in price because you believe that writing ITM calls 'guarantees' assignment. That is simply wrong. Stocks do decline and many ITM options quickly become OTM otions and are never assigned. Second, you do indeed make a capital gain if assigned. You earn all the time premium in the option you sold. Not the entire premium is profit - just the time premium.
Compared to that if you write OTM Call, you generate Income as well as Capital Gain. You only have those capital gains if the stock goes higher. Have you never picked a stock that declines in price?
I will appreciate your detail explanation. I don't have the time to give you details. Writing ITM calls gives you more downside protection against loss. In return, you earn a smaller capital profit if the stock rises. Writing OTM provides less protection against loss and the possibility of higher capital gains. Me - I need that extra safety. You -? Well that's your choice as you should trade according your your own comfort zone.
Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options