"re: Selling covered calls, buy/write strategies"
"These strategies are more conservative than plain vanilla stock ownership. You ought to take some time to look at the risk."
Oh, I have. My point was not that they don't have a place in the spectrum of investing, but that claims here about much money people have made are usually misleading: writing covered calls on a flat-to-down market is often profitable, modestly. In a generally rising market, or where the stock on which the CCs are written is rising, the "opportunity cost" can rise dramatically. (E.g., where the CC was written at $30, for a premium of $3, say, and then the stock goes to $50. Basically, a $17 loss. There are some who claim they write _other_ options to pay for this loss, e.g., to roll their positions forward, but this is the opposite of a "conservative" strategy--this is hoping to win back losses by doubling down.
--Tim May |
