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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: rydad who wrote (3390)2/17/2002 12:20:07 PM
From: ML Harper  Read Replies (1) of 5205
 
rydad,

I am also learning how to do covered calls to see if I can generate 'income'. I am definitely going to use the KISS principle and look for solid companies with good Value Line and Standard and Poors assessments.
With my very limited 4 month experience I can see that you don't want to get caught in stocks drifting downward. So this is great reality check environment because stocks are drifting down.
But...in theory...if we can squeeze out 3-5% returns per month we can afford to handle some major declines.
I will probably buy 4 to 6 stocks, looking for solid companies that are bottoming out and write one month out (front month?) covered calls trying to average 5%. Obviously if you can hit 50% a year, you are in tall cotton. But I can see how losses in the underlying positions can really cut into this.
I have got a trusty two-column spread sheet. I will track my costs and my returns. I think I have to show myself the math to avoid self-deception.
Marty
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