I just took another run through the WINs powerpoint presentation, and I think there is a difference between it and what Steve said. Steve's strategy was to leg into protective puts and calls to cover your extreme downside and extreme upside positions. I would call it "buying insurance" Having just gone through a large drop in price with SAVLY (at one point it had lost more than 1/2 of it's value on a mildly poor earnings report), I think insurance is a very valuable part of this business of covered call writing. The markets are extremely volatile now...we have far too many well-to-do yuppies hovering over their keyboards...
Steve also took the position that you should pull your income from CC writing aside, and either invest it conservatively, or give it to charity. I might differ slightly from him there...but he did not talk at all about trading options as a sideshow, like you do with the WINs strategy. Given that I am only able to afford to write calls on stocks that are lower priced, and that have very low option liquidity, I am not finding the sideshow part of WINs to be a viable element of the strategy ...at least so far. I think that I will need to graduate to LEAPs on bigger stocks, with calendar spreads as a substitute for covered call writing, so that I can afford to play with you big boys on these sideshows! At this point, about the best I can do is re-invest (ala...gag...Wade Cook) in more stocks, with more CCs to build my base.
Anyway, since Steve is no longer with us, perhaps Herm can clarify all of this for us. As a newbe, I haven't lived through 10,000+ postings...though we may all get the chance with the heroic indexing effort now under way! |
