Writing Call Options on Trashy Stocks

This is an income generation strategy, and can also be used when not comfortable chasing a stock down to short after a move lower. It should only tie up a tiny amount of margin due to lower price of the stocks, and should generate a good ROI.

Usually shorting calls on low priced stocks is an extremely risk strategy because of how high low priced stocks can (temporarily) go. This makes shorting calls on them in general kinda like picking up pennies in front a steam-roller. However, on a stock that has already had its' (undeserved) run - classic example being a stock near bankruptcy, or a stock that needs constant raises. Once they have had their run overhead supply is created and the upside risk is so much lower. It is very important to do this on stocks that you can have an extreme bias.

Goal for this strategy currently is to make only $100 a week. No need to push it too hard. Should only tie up about $2500 in margin.

Pick prices and quantities of calls to short that happy to get executed on. For example if shorting the AVXL $5 calls (spot currently $4.80) for 3 weeks from now you wouldn't want to short too many because there's an off chance it might go to $7 or something. (Note that you wouldn't usually want to go this close to spot, as you don't really want to be exercised).

If you do get exercised: This is why it is so important to ensure that you have a strong bias for the stock getting crushed. Need to weigh up whether should simply bid to cover position lower (ideally at the option price), or write some put options on the stock that you are heavily biased to the short side. This is a very unique situation to be in, writing puts on a stock you're extremely bearish on, and if everyone else is, may get compensated quite heavily for this.
Things to consider:
(1) Borrow fees: If opting to write puts and hold short position, need to factor in borrow fees.
(2) Writing puts will somewhat reduce risk (improve average).
(3) Time-frame of writing puts. For example if you can write weekly puts it's probably much more worthwhile than holding the short for a month for the monthly puts.
(4) Writing puts will improve average.
(5) Bidding to cover stock may allow a rinse and repeat of the writing of calls.
(6) Am I in a position to write some more higher calls - aka add to position. Should always try to be in this position.