rydad,
As best as I can interpret them, I believe your expectations are unrealistic. You seem to be willing to accept a "measly" 3% per month with risk roughly equivalent to a CD. That equates to an essentially guaranteed return of 36% per year. This sounds just a little bit optimistic to me.
If you are serious about dramatically reducing risk, you should be writing DITM calls and accepting the very low time premium associated with them. You can eliminate much of the downside risk that way, but you will be eliminating much of the premium collected as well. Of course, if you're looking for a more modest return like 8-10% annually, you should be able to get away with this. Transactions and taxes will hurt you more at this level, though, so be sure to include them in your calculations. There is no free lunch.
No matter what you decide to do, however, do not underestimate the risk associated with CC writing. No matter how "stable" you think a stock is you can easily be wrong, and in a big way. What's more, the lower the dollar amount of premium you are collecting, the less wrong you have to be before you find yourself in a hole. Be careful out there. It's pretty easy to outsmart yourself.
dM
P.S. In a declining market, the best strategy is to buy puts, not sell them. (Well, the real best strategy is to sell uncovered calls, but I don't have the huevos for that.) |
