Just being well educated or even "smart" doesn't mean one knows how to live life well. It's sad to see folks you'd think should have life figured out screwing things up when they don't have to.
The "worst case scenario" with covered call options is that the price of the shares will shoot up astronomically and you will have already agreed on a lower price to sell your shares. In that sense you have a "loss" but only if you weren't happy with the profit you booked even though if you were a prophet you would have known to avoid that covered call option. In my experience, based on my methods, that is rare. I just move on when that happens and invest the proceeds in another optionable stock.
I did covered calls once upon a time. It is far from free money, given the capital risk. Am not posting to dissuade anyone but here is what can happen. Obviously the downside risk is much greater than the upside. If a bear market occurs or simply some of your inventory of covered call stocks start to crash, you can only roll out the call options so much, and collect so much on premiums. You may find that the inventory of stocks for which you have covered calls are becoming the worst stocks to own, and that you are having to select lower and lower strike prices for longer and longer expiration periods, even LEAPS. Maybe a partial solution is to pick stocks that seem unlikely to go substantially down, though they will have less appealing premiums. Not sure. But it is not free money, though for a while it may seem so. I use to relay it was the best thing since sliced bread...until it wasn't.
This is my view and thoughts as well. I'm hoping for more years and would be fine with less money. I want more time to do all the things that I love to do. Can't buy back time!!
I agree especially if you sell put options and end up keeping crappy stocks that just don’t recover. I have lost thousands of dollars on one stock or ETF, which is hard to make up by selling options with only hundred dollar premium each.
Same thing as selling naked puts, or if prefer cash covered if sounds better. But good luck to all.
I would appreciatte a new thread on this topic of passing along the value of some
Most domestic equities pay qualified dividends, which along with long-term capital gains, are taxed at lower rates of 0% or 15% for most people depending on their income level. Merck, Verizon and T would be qualified dividends.
Agree it is not a free money and require some work to be done. But there are strategies designed to reduce downside risk you're talking about. One approach could be to limit downside of your option by -10% for example and close it at the moment it crosses that point. Then initiate another call for the same or different stock with more realistic strike price. Some part of premium would be lost on closure fee, but it may be still better in the long term than allow it to get further down.
I don't have any annuity investments, and have generally been avoiding even looking at them due to the negative attention they generally get. I should probably have a better understanding and response.
This is true for the most part. One other aspect is that you are not selling the stock/etf at a loss during down cycles as we are in now. On the other hand, if you get to "greedy" (and I have done a little of that), you have a product that without reinvestment of dividends is at best break even or sometimes worse.
Hi LTSTRYAGIN -
People will be more than happy to provide their thoughts and experiences for sure!
Hi new here. If roughly equal portions VTI as secondary income and a group of CEF’s for income in a TIRA. In 15 years, since the bank crisis, VTI has about tripled in value and CEF income has tripled churning excess to needs money back into selected CEF’s and turning present income needs cash flow faucets off and on depending mostly on present values, read premiums. I am also a buy and hold investor so very little if any trading
Thanks for clarifying my thoughts on these dividends.
Some nice holdings there. A little less "risky" than my overall Portfolio (and obviously a larger investment). I hope to move more to this level of risk once I start my SS. Thanks for sharing Waynew!
Time for a new Audi!
I'm at 149k YTD....nothing special, just bondish income CEFs.
