Hey Jen,
BM gave your a common point of view which is widely accepted. It is easier to make money in a bull market. If you ever go to the Wade Crook, I mean, Wade Cook :-) school of "How to get rich" overnight he will place emphasis on the compounded annual rate of return. Of course, he try to show the returns if the stock keeps going up and how the premies can add up. Well, in the real world of the stock market the price of the stock goes up, sideways, sideways, down, and maybe a gaps up or down here and there!
Therefore, a true CC cowboy must have a tool shed of strategies. CCing can be used as a hedge against price drops! Insurance policy in other words. Example, when XRAY made the attempt to reach the recent 52-week high of $35 it tried several times (3 times) only to fail.
You go back and look at the RSI and BB and you will notice that the when the RSI peaks above 70 and the price touches the upper BB bands WATCH OUT! The stock will GENERALLY PULL BACK at that point. Knowing that you could have sold CCs deep into the money at the peak (and loaded up on PUTs using your CCer's premie money of course!!!) and deposited a hunk of premie (locked in) as the price moved lower, lower, and still lower. Again, this is assuming that the fundementals did not change and you are still long on the stock. You own the stock because you like it anyway! Why not make money EVEN when it drops.
As an illustration, you could of sold your CCs in the money for 2 3/4 wait for the price drop(s) and then covered later for 3/4. That is playing from both sides of the normal price movements as indicted above. Not impossible to learn and fairly easy to do when you use the charts to pinpoint those events. If fact, your MMs are the ones that have to follow a similar process in order to make money off the market during up/down movements. You are only playing with the same tools. You must learn to make money up, down and sideways price moves in the CC arena. I say "DON'T THINK CCs IS ONLY FOR UP MARKETS! Mild corrections are really nice to have! It makes it more profitable.
Figure out my next statement! It is much FASTER to make BIG BIG $$ money in a down market! Why? Increases in up prices generally take a long time to evolve. But, when the stock price drops, it drops like a rock! Therefore, if you are prepared to act before the drops you can pocket some real big money. Example, do you recall EJ's BIG SCORE with his Bear Trap?
Message 4737141
Nice work EJ! |
