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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Uncle Frank who wrote (4842)3/14/2007 8:10:24 AM
From: Bridge Player  Read Replies (1) of 5205
 
<<If I've sold covered calls and the stock spikes, I let myself get called, and buy back when it fills the gap, which generally will happen. If I've written puts and the stock dips, I accept the consignment, because I only write against stocks I like to own.>>

Makes sense to me, Frank. No reason to complicate things.

And if you are put the stock, and it looks right, you can always sell calls against it if you aren't interested in keeping it as a long term holding.

Choosing stocks selling at reasonable valuations, as opposed to bubble or nose-bleed, reduces ones risk considerably. And stocks with nice fat dividends further reduce risk IMO. Good examples are ERF and HTE.

Afterthought edit: Unfortunately, such stocks usually have quite small put premiums.
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