In my previous post, I gave the details of a recent covered call trade. If you add up the commissions for a called covered call trade, the total commission for a 100 share/1 option trade is $15.50.
To diversify my account I am making trades in the $1000-$1200 range, to give me up to 4 open positions at any one time. This makes the commissions approximately 1.5% of of each round trip trade. If I average trading the portfolio 9 times a year (50% one month trades & 50% two month trades), my total commission costs are 13.5% of the portfolio value.
Obviously it is important to figure all trades net of commissions to see if the profitability is acceptable. A 3% raw gain reduced by half becomes unacceptable.
If a stock is not called and I can write another call on the same stock the cost for that round trip is reduced by 1/2%.
The biggest thing I can do to reduce the negative effect of commissions is to trade in larger dollar amounts. Trades in the $2000 range reduce the commission drag on gains by half. So as my account grows, the results should improve just by the lower percentage that will be taken by commissions.