I would not write cc on a volatile gorilla, especially when it's in a consolidating phase as is QCOM. If someone does that they are perfectly comfortable losing their stock, doing a percentage deal, and they take the risk of writing the calls at a certain strike, which if called away would net a certian percentage gain. They figure it out on a numbers basis.
Me, I have exactly as much QCOM as I want. I chose that amount through stock purchase and exercising calls. And I will be accumulating JDSU in March via exercising DIM calls. I am not comfortable writing cc on either of them.
I do see the point, however, of buying a stock that's in a kind of flat trading range (say, MSFT under DOJ trial cloud) and writing OTM calls--if you want to do that with a piece of your portfolio. For cc strategy I would only pick stocks that look like they're not going anywhere soon--I noticed Voltaire bought 15,000 shares of Globalstar, and sold cc on it. He did that with a small portion of his portfolio. That makes sense.
I prefer to sell puts, but that's because I don't buy on margin. So I've got this margin capacity and it allows ME to take advantage of the market knowingly. With a cc, I'm psychologically at a disadvantage, at least on my favorite gorillas, because I might be called away, and I have no control over it. I don't like my portfolio being at the mercy of the market like that.
You have to know your own psyche. |
