The Covered Calls for Dummies Thread
Welcome to the Covered Calls for Dummies thread. This is the place to post your thoughts, questions, and comments on how to use covered calls to generate enhanced yields from your tech investments.
The thread is geared, as its title suggests, to beginners and/or those interested in relatively simple and straightforward strategies. We hope that polite, honest discussion of our plans, successes, and failures will sharpen our investing skills and teach us how to harness the volatility in our portfolios. Oh, and please fill in your personal profile as much as possible so we know who we're dealing with.
Resources
Option chains are available on the NASDAQ website at:
options.nasdaq.com
Select this reference and then type the company symbol in the URL address box after the "selected=" or in the box labelled "Add a Security". Save a bookmark to the resulting page.
Tracking the cboe indexes has become an additional element in the covered call decision making check list. Fellow dummies looking to get quotes on the vix and vxn might find the following link useful (thanks Dale Russell & Uncle Frank):
finance.yahoo.com^vix+^vxn&d=2b
Lawrence McMIllan's book (Options as a Strategic Investment, 3rd ed, p.83, New York Institute of Finance, Paramus, NJ, 1993.) is often mentioned by posters on this thread. It is considered to be the bible of options trading. The first few chapters are the most useful ones for our purposes.
A popular book for beginners is Michael Thomsett's Getting Started in Options, 4th Ed. If you get serious about writing covered calls you'll want to consult additional books (and the members of this thread<g>).
LEAPS strategies are carefully considered in LEAPS: Long-Term Equity Anticipation Securites: What They Are and How to Use Them for Profit and Protection by Harrison Roth.
--Mike Buckley and Dale Russell have suggested we mention that when a stock showing a paper profit is called in a taxable account there are tax consequences that pose risk not present in a tax-deferred account. The calculated yield needs to be adjusted downward by the individual's marginal tax rate (assuming one knows what that will be in advance) to better understand that risk. |
