Here is an extreme example:
You are long 10 contracts, price makes a breakout type move, & you double your position to 20 contracts. Should you write OTM or ITM calls?
-If price is at 100 and you write a 95 call then you receive 5 (cents?) in intrinsic value; you do not lose Space until price falls below 95.
-Options closer to the money have higher THETA...
-You can better fund OTM puts to collar part of your position (driving 00 backwards).
-You can more easily leg into different shapes, at a credit, after an adverse move...
This would free up the underlying so that you can reduce your size (driving 00 backwards) which might now be overprotected by puts (driving 00 backwards).
I probably shouldn't be telling you my strategies as I have a way of perverting common practice
The key thoughts to take away from what I am saying is:
1) if you are the type of guy who buys 2 Futures contracts and sets a SL/TP then by all means write OTM calls.
2) if you accumulate large positions then write in the money options;
it sounds crazy until you consider future changes to your position size.
3) strategies are not as black & white as you think them to be.
Lets say that the ITM option is $2300:
In the first example, we increased our size in the underlying from 10 to 20 contracts (halving space) & can now collect $46,000 in premium.
With this money we can now restore some Space by collaring part of the position.
-If we spend $6000 on puts then we are left with $40,000 of OPM
that is not an insignificant sum considering that we only generated space with 10 contracts or less (when flat, size can increase on a move towards 00).
OTM Covered Calls: The advantage is that you realize an increased gain in the underlying while collecting the premium...
You really need price to move sideways &/or up.
If price moves down then you are going to have to use half of your premium to protect your contracts or take profit on the calls and deal with the declining price.
-One strategy would be to use some of your space to convert a portion of your contracts into calls and write OTM options; that is what I did when Coffee prices were low & volatility was skyrocketing.
"...ITM Covered Calls is more of an entry strategy?"