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BlueCollarInvestor (November 30, 1999 at 12:00 am)
I've written a book on this subject, "Exit Strategies for CC Writing". Some points:
1- Monitor 50-d and 200-d moving averages of S&P 500 for market direction
2- Monitor VIX for market volatility
3- Avoid earnings reports (a big "gap down" time
4- use technical analysis for stock and strike selection
5- use in-the-money strikes for protection
6- some use protective puts (I don't) for protection
7- BE PREPARED TO BUY BACK THE OPTION -EXIT STARATEGIES
robwiley01 (November 30, 1999 at 12:00 am)
how do you deal with a crashing gap down?
Or if it trails down slowly? you would be chasing it all the way and likely never recoup. What about the next bubble crash? like we had in summer 2008?
what
buckwa123456 (November 30, 1999 at 12:00 am)
The 2 A+ rated stocks u used as CC examples, LHCG & AVAV both halved in price over the month or two after ur video, the downside protection didn't really help at all in this case, and 5% per mouth income doesn't sound so good after the stock halves in value. How do u handle this? Do u just take the loss and continue using the same strategy? Did you exit these stocks? Did u buy any puts after the stock lost x%? I had 4 stocks because I thought diversification made it safer,4 of my stocks did this
BlueCollarInvestor (November 30, 1999 at 12:00 am)
Your question is an excellent one. You DO have the choice of selling a 2-week or 6-week option.Due to the extreme amount of time decay the last 2 weeks of a contract period the premium would not be reflective of a typical option return for 1-month contracts. Since this is an example, I chose the latter and annualized by muliplying by 8.5.
Thanks for a great question.
Alan
anger42 (November 30, 1999 at 12:00 am)
HAVE A QUESTION!!! in this video you mentioned that you had two weeks to go until the Jan 09 experation date. Why wouldn't you take a position for just two weeks and make a little extra money and then reinvest your premiums for the Feb 09 calls?? Just curious thanks.
BlueCollarInvestor (November 30, 1999 at 12:00 am)
Covered call writing caught my attention 10 years ago when I learned that the government considers this strategy so safe, it allows you to use it in your self-directed IRAs.
I have worked on perfecting cc writing via education and intelligent, non-emotional decisions. It has changed my life!
Only you can decide if this strategy is right for you, not me or anyone else.
davecir123 (November 30, 1999 at 12:00 am)
If you are viewing this video and think you can buy a book on covered calls and make your fortune, I can guarantee you that you will lose money. This is a loser strategy, just take a look at the risk graph of a covered call, its the same as a naked put, you can lose a lot. STAY AWAY! |
