"I have always thought that options should be traded by people who have done lots of research on volatility, and having worked in the brokerage business for 14 years"
Well, now we have reached some common ground. I agree with you that options are much too complex a game to be traded by the neophytes, including myself. However, I would submit that almost any trading strategy, stocks, or whatever, is very complex and difficult in today's fast paced market. Covered Call writing seems very simple. And for the devotees of clowns like Wade Cook, it is simple until they find themselves sitting on a stock that they paid $20 for, which is now worth $3, and no longer lists options.
Covered call writing, as practiced by most, including those who use McMillan as a bible, is simply a way to enhance long term holdings. It is not unusual to wind up with a very small net as you "protect" your long term position...taxes and dividends weigh heavily into the traditional Covered Call writing strategy, and premium is sacrificed to keep them in place. No doubt, as you said, something the brokers love.
However, if you are willing to view Covered Call writing from a business perspective, then you would find that total ROI is only a small piece of the covered call puzzle. Instead, cash flow management, leverage through financing (margin), compounding your profits quickly to achieve maximum growth in equity, insurance to protect your downside, and careful trading to obtain position, will give you returns that will rival any strategy out there. I don't have years of experience trading like you do, but I've run lots of businesses, and I would have killed for the cash flow and relatively risk-free returns I see from Covered Call writing from a margin account. I don't think you can consistently beat it anywhere else in the market. But like everything else, you have to work damn hard at it. This is a full time game if you want maximum returns. A truly great Covered Call program is FIRST an MBA's game, THEN a stock or options trader's game. |
