I think you could do it on a portion of your income in the beano way, as Tom has explained to me. You're looking at a portin of your income that doesn't freak you if it goes up and down with a volatile market, and you're looking at deriving at certain percentage from it (say 3-5% on conservative stocks, 10% on volatile ones) from cc each month to cover your living expenses. The problem is psychology. You have to NOT watch that portion day by day. I find it really hard to pull the trigger myself. I was watching ELON when it dipped to 33 1/2. I know 30-32 is a fairly secure bottom int his market. I thot, well I could buy 1,000 shares and sell them at 38 (which it hit the very next day), (which I really wish I'd done) or I could just buy 1,000 and write cc at 35 for this week (1 5/8 at the time) and rewrite again on Monday for Sept. Elon right now would give an income of 4K every four weeks on every 1,000 shares.
The problem is you can't get scared, let's say you did ita t 38 and this month it went up down up down up down. W orst case scenario as Vman explained to me is let's say ELON goes down to zero, well even so, you're getting 4K a month, your stock is free in less than a year anyway. And you know it won't go down to zero. It's hard not to come out ahead at some point.
What too many people do and I wonder if I would do--is turn into nervous nelly, and not do the buy-write at the same moment. You have to buy-write and forget about it until next month. It's always giving the same percentage unless it becomes flatline steady, in which case premiums deflate, but in which case you also don't have to worry about the stock going way down.
As for getting called away or not...I guess when you write the call you have to be philosophically at ease with either. I wrote Aug 125s on JDSU and Sept 85 on ORCL. I tried to do this on "up" days to get decent premium. I doubt I'll get called away but if so, so be it, I made a profit.
What do you think? |
