"You may be right in that there is no guarantee in making more by writing covered calls as compared to just holding the stock. I think it all depends on how you predict the market to behave. However, *if* you can predict the market pattern, options trading will *always* make more money (by writing covered calls in a flat market, writing out of the money calls in a slightly bullish market and so on)."
A very big *if*: "*if* you can predict the market pattern, options trading will *always* make more money..."
Yeah, and being able to to predict the spin of a roulette wheel can be even more profitable.
Not to belabor the obvious, but writing covered calls is essentially part of a collar strategy: upside is limited (because the "calls" will be "called" in most cases) and downside is of course unlimited.
"Now you can argue and say that it is not smart (and possible to do it reliably) to time the market. But I really doubt if there are many investor who do not try to time to market and play into the prediction game, alteast to some extent. Otherwise, an intel investor will have almost no gain to show for since August 1997."
I agree that many try to time the market...this doesn't make it possible to do, in general.
I believe there are _longterm_ ways to time markets, over a span of months to years. Based on expert knowledge, inside knowledge, etc. (Concluding that the FDIV problem was overblown, for example.)
--TIm May |
