Covered calls made easy....too easy?

[laurence]

My coworker has been using this service for some time (around 12 months) and thinks it's the best thing ever. Maybe he's just had a lucky spell. Fees are high, but if you really can get the return they claim, well... Anyone seen this or have an opinion?

http://www.poweroptionsapplied.com/

 

[lazyday]

I've heard of people advertising covered call strategies on the radio.

IMO, the game is probably over. It may have been profitable in the past, and insanely profitable on a risk adjusted basis, but if now everybody's doing it, watch out!

 

[LOL!]

I sell covered calls when I think they make sense. I am not getting rich doing so.

First, you have to own the underlying stock. That makes it pretty easy because you either already own the stock or you want to own the stock even if you weren't going to write a covered call. So because you own the stock, you only have to look for calls on the stocks you own. That's pretty easy to do with an Excel spreadsheet with the stock-quote plugin. Next you just run your spreadsheet and have it change the cell to green background when it makes sense to sell the covered call. "Makes sense" to me is a premium of more than 1.5% for a short-term option of 30 days or less with enough volume to allow you to get it and commissions that are less than 10% of the transaction. You also have to accept that the stock may get called away and you are giving up potential gains in the stock for that option.

Anyways, it ain't rocket science. I didn't see anything on the web site mentioned that would make me want to pay for something that I can do on my own just by opening up an Excel file.

 

[milz50]

Two things always bothered me about this strategy...

1) Your maximum upside is the price of the call (minus commissions/spread and short term taxes) while maintaining almost the entire downside if the underlying stock were to fall substantially.  Maximum risk / limited reward.

2) A lot of people use this with large holdings (it's not worth it to write one call) that they'd like to keep for a while.  The issue is that if the equity gets called, it will create a taxable event (unless you buy back the call which has an unlimited ceiling).  If you were willing to part with the stock, why not just sell it.

I've been lurking on this board for over a year, but I don't think I've posted yet.  I hope my comments makes sense.

 

[whitestick]

Certainly there is risk, but proper classifications will greatly minimize the risk. And, not looking for the homerun, just looking for a decent income to live off of. I've paid the 3k for the Kim Snider method, and recovered that money if the first two months. For me it has worked so far. Not ready to put all my resources into it, but as a diversification strategy, I'm willing to keep trying with it for awhile.
As to the many positions concern, I have a maximum of 4 so far (2 in each of may accounts), which makes it easy to keep track of. I'm pretty simple minded, and can't/won't spend more then a couple of hours a month on it.
You can always dip your toe in, rather then go wild. I believe the minimum amount of money to get started is 25,000, which gives you the buffer you need to ride the market up and downs. Tends to limit the players, but even mutual funds have some minimum investments.
Without sounding like a shill/salesman/ or whatever the term is, go to http://www.kimsnider.com/ and see if it interests you. I was skeptical and still am, but so far it's working for me.

 

[Mr._johngalt]

Certainly there is risk, but proper classifications will greatly minimize the risk. And, not looking for the homerun, just looking for a decent income to live off of.  I've paid the 3k for the Kim Snider method, and recovered that money if the first two months.  For me it has worked so far.  Not ready to put all my resources into it, but as a diversification strategy, I'm willing to keep trying with it for awhile. 
As to the many positions concern, I have a maximum of 4 so far (2 in each of may accounts), which makes it easy to keep track of. I'm pretty simple minded, and can't/won't spend more then a couple of hours a month on it.
You can always dip your toe in, rather then go wild.  I believe the minimum amount of money to get started is 25,000, which gives you the buffer you need to ride the market up and downs.  Tends to limit the players, but even mutual funds have some minimum investments.
Without sounding like a shill/salesman/ or whatever the term is, go to http://www.kimsnider.com/ and see if it interests you.  I was skeptical and still am, but so far it's working for me.

My wife has us signed up for a "seminar" on Friday to learn about something called
"Investools". Don't know anything about it except they advertise on TV with the
usual pitch......"work from home and make big $ in as little as 5 hours a week"
etc etc. I am only going along to insure domestic tranquility. If any of you have heard
of this (or heard their pitch), please post some negative stuff here. Maybe it's
not too late for me to wiggle out of this Thanks.

JG

 

[LOL!]

My wife has us signed up for a "seminar" on Friday to learn about something called
"Investools". Don't know anything about it except they advertise on TV with the
usual pitch......

Got a mailing from them.  No useful information whatsoever in the mailing, so I suspect the sales pitch  seminar will be the same way.  Of course, anything to get you away from 100% fixed instruments would be a plus, I would think.

 

[LOL!]

Two things always bothered me about this strategy...

1) Your maximum upside ..... Maximum risk / limited reward.

2) A lot of people use this with large holdings (it's not worth it to write one call) ...

I hope my comments makes sense.

milz50, your comments make perfect sense, and they are true as well. 

 

[Mr._johngalt]

Got a mailing from them.  No useful information whatsoever in the mailing, so I suspect the sales pitch  seminar will be the same way.  Of course, anything to get you away from 100% fixed instruments would be a plus, I would think.

But it will keep me off the water for a day. Arrrrrrrrrrrrrrgh!

JG