RM--another point, I think Volty made on the board last night and it's important--let';s say at some point the best laid plans go awry (i.e. you were trying to buy-write at the bottom of the channel, hoping to either keep premium and/or get called, pocketing an additional bit of change, and buy-write again) and market downdrafts or there's FUD or bad news and kaput, your stock goes down 20 or 30% or whatever. So you had elon at 35 now suddenly its 25. So you say, okay, I'll buy-write at 25, it's percentage income I'm after and that remains good. But then that month, it RECOVERS and you get called out at 25. Now all you have is 25. And that's no good, you lost more than you gained (maybe--depends ho wlong you were doing it)
What you need to do if that scenario pops up is buy the calls back at a higher price and roll out, until you're back in the black. Volty notes how he made a fortune doing that when Dell went 90 to 45 and then recovered
This means in order to prepare for the occasional problem such as that, you only do this on a modest proportion of your portfolio. You don't buy-write on the whole thing by any means. You have to have some room to take a few hits, i.e. to be able to take time to recover |
