Thanks Hank!
A couple of other comments:
Wither zero interest rates, it is hard to find safe s/t bonds with decent yield. Yes, margin is risky to a degree but my thought was that I could sell the bonds close to par if I had to. I was 99.99% sure that the bonds would be redeemed at par (actually a couple were called at a small premium) at maturity. The thought was at worst, I'd be paying a carrying charge for a short time.
What works for you is what works for you. I don't mean to diss the indicators. I sometimes follow stocks up as well selling puts as i go, but if it keeps going, I eventually say "no mas" and move to a different security.
I definitely think your system has merit but if you do it long enough, you may ( as have I ) run into a change of conviction. That is why, my number one question is my comfort with the stock. I have a long term outlook and a ton of patience but will dump something if the story changes.
You are right ( or write) as the case may be on giving up some of the premium. Since the value of the underlying is my driver, if I can roll down and out and still get a credit, I view it as a gift. I have a friend who professionally manages funds geared towards DGI. She is much like Warren Buffett if she can buy something "on sale".
Option writing is secondary to me. It is a fun thing to d. When I look back on the 10 years of data, my thought is that I probably would have just been better off in many stocks by just buying and holding the underlying.
Bob goes after a nice yield and value and that seems to work really well. Others have done fantastic with trading and analyzing a lot of metrics. Individual stocks and markets don't always move in the same direction. Premiums will probably be a lot less lucrative at some point in the future. I do live off the dividends and don't have to liquidate anything (knock on wood). I do however, reinvest a portion of the option proceeds into additional holdings when i see suitable bargains. |
