In the end, this is the way I look at covered calls and equity investing.
You invest in a stock and take a certain risk. You take that risk because you think there is a possibility of getting a decent reward. By writing a covered call, you haven't really changed your risk at all. The downside of the stock is still pretty much the same less the price of the call, which is most probably small compared with the price of the stock.
You have, however, completely eliminated the potential reward, outside whatever amount of money the strike price is. For a stock like Intel, that amount is probably much smaller than the potential upside if things work well.
In the end, if you have too much risk in a stock, in the long run you're better off selling some of the stock until the risk is manageable. All of the added strategies, like rolling at a certain price or covering at a certain price, are just options trading strategies, not risk minimizing strategies on a common stock.
IMO, the only winners in the long run in covered call strategies are the brokerage houses getting the extra commissions. |
