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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Hepps who wrote (4567)11/25/2006 10:40:42 AM
From: Hepps  Read Replies (1) of 5205
 
A couple of weeks ago I posted a strategy of selling both covered calls and puts against cash.

Additional reading now indicates I was describing a covered strangle; a strategy that isn't very popular with the experts. Their take on it is: limited potential profit and unlimited potential loss.

I disagree. For a trader, they may have a point. For a stock owner, they have got it exactly wrong.

If you like the stock you're working, a covered strangle does exactly what the maxim says: Buy low, sell high. It also pays you to commit to the strategy with a clear head, that is to say, independent of up and down market drafts that affect our daily thinking.

As some here have been doing with their covered calls, you can also unwind one end of the position when the market moves, either reselling it or staying on the sidelines for conditions that you're comfortable with.

Now if I could just get comfortable owning RMBS, I could make a killing...
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