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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: rydad who wrote (1852)8/10/2001 1:59:59 AM
From: Mathemagician  Read Replies (1) of 5205
 
I haven't really scrutinized and analyzed the article on straddles and strangles that I just posted, but now I am wondering with these 4 basic strategies(sp?) -- selling covered calls, selling puts, straddles, strangles, how can one integrate them into a good over all plan to generate consistent, relatively low risk income?

You should check out Roth's LEAPS Money Generator. It is a systematic way to employ these strategies to generate income. Here's an outline:

Step 1. Sell a naked put.
If it expires unassigned, you are ahead 1 premium. Repeat until assigned.
If assigned, you now have 1 premium and 1 block of stock. Proceed to step 2.

Step 2. Sell a straddle/combination.
If the stock goes up, you are ahead 3 premiums plus (hopefully) some capital gains. Go to step 1.
If the stock goes down, you have collected 3 premiums and own 2 blocks of stock. Proceed to step 3.

Step 3. Sell 2 covered calls.
If the stock goes up, you are ahead 5 premiums and (hopefully) some capital gains. Go to step 1.
If not, repeat until called (or consider liquidating the position).

dM
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