Taxman, from a trader's viewpoint, covered calls are boring, but from a long term investor's view, they are a great way to generate cash. This is particularly true in an ira environment, where there are limitations on adding cash.
If you sell short term out of the money calls and the price runs past the strike price, you make a great return when you get assigned, plus you keep the premium. Most unusual rises retrace at some point, so you just hold the cash and buy back in on the next dip.
If the price goes down, the calls expire worthless and you keep the stock and the premium But if it is a core holding, you wouldn't have sold it anyway. At least you've hedged a little bit.
Done monthly, in a choppy market, a well run cc strategy could return over 40% a year, a nice kicker to a buy and hold type's net worth.
Just a view from a different angle,
Frank |
