http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/ One Guy's Journey to Passive Income Through Dividend Investing Fri, 10 Feb 2012 13:02:29 +0000 hourly 1 http://wordpress.org/?v=3.2.1 http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/comment-page-1/#comment-57242 Monty Sands Wed, 03 Nov 2010 04:16:51 +0000 http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/#comment-57242 I tried covered calls but found the movement to be slow. It's safe but i think we are all looking for something with more of an upside. I tried covered calls but found the movement to be slow. It’s safe but i think we are all looking for something with more of an upside.

]]> http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/comment-page-1/#comment-55814 Teddi Knight Wed, 31 Mar 2010 15:04:56 +0000 http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/#comment-55814 Your article is excellent and offers a very good outline of the risks of covered call writing. I have been doing covered calls since options were extended to many stocks back in the 1970's. I have never had a stock underperform because of covered call writing. A lot depends on the investor. I live in Canada and in our country retirement accounts are strictly regulated. An investor can buy stocks and securities but they can only sell covered calls against them. We are not allowed to sell naked or cash secured puts. This forced me years ago to examine covered call writing strategies as I needed my portfolio to grow at least 12% every year. While I love naked puts I have developed many strategies over years of doing covered calls in my retirement account that provide excellent returns and at the same time offer some protection for downside movement. I believe a well constructed covered call portfolio will outperform buy and hold. While many buy and hold investors are content to reinvest the dividends from dividend paying stocks, I am collecting through covered call writing, small option premiums every month or two on my favorite stocks and I can reinvest that money back into the stock (or other stocks) at a much quicker pace. The risk of a covered call writing strategy is not putting in place clear goals and objectives prior to establishing positions. Without clear goals and objectives an investor, new to covered calls, will be upset to see a stock shoot past their strike point, and often will purchase the covered call back, creating a loss on the call sold, and then watch the stock pull back adding to his loss. This is not the way to handle covered calls. If an investor is new to a strategy they should paper trade for many months, study other covered call writing strategies and learn how to handle stock movements; when to buy back their position; when to let the dividend be called with the covered call; when to roll up; when to add to their position. The one thing that a covered call writing portfolio does is provide not just a steady income stream, but forces the investor to take profits along the way and then reinvest back either into the same stock or a new stock. If a covered call trade can provide a return of just 12% a year, every year, they will far surpass any buy and hold trader over years of investing. Those who fail at covered call writing are those who have not put together an iron clad strategy, are not completely sold on the concept of covered call writing and therefore fluctuate between buy and hold and covered call writing. The successful covered call writer is a trader who has established clear goals and objectives and understand that over time they will surpass the buy and hold strategy. I have posted many trades on my website www.fullyinformed.com of real trades being done presently as well as past trades to show the types of returns available. Go to my section on the retirement accounts where I can only do covered call writing because of Canadian Laws. You can see that even when stocks shoot up, there are many strategies available that will continue to outperform buy and hold investors. Over the long run, covered call writing provides income, capital gains and limited protection from downside action. For myself, when that downside comes I have built up a nice cash base to jump in and buy my favorite stocks at discount prices. There are many benefits to covered call writing, but goals and objectives have to be established to reap the true reward of covered call investing. When an investor realizes this they will benefit greatly from a covered call writing strategy and will look forward to their favorite stock going on sale in a major downturn such as we saw in late 2008 and early 2009. Your article is excellent and offers a very good outline of the risks of covered call writing. I have been doing covered calls since options were extended to many stocks back in the 1970′s. I have never had a stock underperform because of covered call writing. A lot depends on the investor. I live in Canada and in our country retirement accounts are strictly regulated. An investor can buy stocks and securities but they can only sell covered calls against them. We are not allowed to sell naked or cash secured puts. This forced me years ago to examine covered call writing strategies as I needed my portfolio to grow at least 12% every year. While I love naked puts I have developed many strategies over years of doing covered calls in my retirement account that provide excellent returns and at the same time offer some protection for downside movement. I believe a well constructed covered call portfolio will outperform buy and hold. While many buy and hold investors are content to reinvest the dividends from dividend paying stocks, I am collecting through covered call writing, small option premiums every month or two on my favorite stocks and I can reinvest that money back into the stock (or other stocks) at a much quicker pace. The risk of a covered call writing strategy is not putting in place clear goals and objectives prior to establishing positions. Without clear goals and objectives an investor, new to covered calls, will be upset to see a stock shoot past their strike point, and often will purchase the covered call back, creating a loss on the call sold, and then watch the stock pull back adding to his loss. This is not the way to handle covered calls. If an investor is new to a strategy they should paper trade for many months, study other covered call writing strategies and learn how to handle stock movements; when to buy back their position; when to let the dividend be called with the covered call; when to roll up; when to add to their position. The one thing that a covered call writing portfolio does is provide not just a steady income stream, but forces the investor to take profits along the way and then reinvest back either into the same stock or a new stock. If a covered call trade can provide a return of just 12% a year, every year, they will far surpass any buy and hold trader over years of investing. Those who fail at covered call writing are those who have not put together an iron clad strategy, are not completely sold on the concept of covered call writing and therefore fluctuate between buy and hold and covered call writing. The successful covered call writer is a trader who has established clear goals and objectives and understand that over time they will surpass the buy and hold strategy. I have posted many trades on my website http://www.fullyinformed.com of real trades being done presently as well as past trades to show the types of returns available. Go to my section on the retirement accounts where I can only do covered call writing because of Canadian Laws. You can see that even when stocks shoot up, there are many strategies available that will continue to outperform buy and hold investors. Over the long run, covered call writing provides income, capital gains and limited protection from downside action. For myself, when that downside comes I have built up a nice cash base to jump in and buy my favorite stocks at discount prices. There are many benefits to covered call writing, but goals and objectives have to be established to reap the true reward of covered call investing. When an investor realizes this they will benefit greatly from a covered call writing strategy and will look forward to their favorite stock going on sale in a major downturn such as we saw in late 2008 and early 2009.

]]> http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/comment-page-1/#comment-54926 Mark Sat, 15 Aug 2009 01:28:13 +0000 http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/#comment-54926 I agree with dividend gowth investor. I tried covered alls for 2 years and found that I wasnt getting anywhere fast. The steep declines is where I got caught out and rolling down wasnt enough. Then it would take months of writing to get back to even again. Yes you are reducing your ownership cst of the stock but your portfolio value is not up. You are better of doing spreads out of the money with leaps instead of covered calls. On dividend capture I would suggest writing leaps on high dividend stocks deep in the money. You get higher leverage and downside protection as well as the dividend Good Luck I agree with dividend gowth investor. I tried covered alls for 2 years and found that I wasnt getting anywhere fast. The steep declines is where I got caught out and rolling down wasnt enough. Then it would take months of writing to get back to even again. Yes you are reducing your ownership cst of the stock but your portfolio value is not up. You are better of doing spreads out of the money with leaps instead of covered calls. On dividend capture I would suggest writing leaps on high dividend stocks deep in the money. You get higher leverage and downside protection as well as the dividend
Good Luck

]]> http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/comment-page-1/#comment-50041 CCWriter Tue, 28 Oct 2008 12:25:38 +0000 http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/#comment-50041 If you’re interested in covered calls you may want to check out <a href="http://coveredwriter.blogspot.com/" rel="nofollow">My Covered Call Blog</a>. If you’re interested in covered calls you may want to check out My Covered Call Blog.

]]> http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/comment-page-1/#comment-50040 CCWriter Tue, 28 Oct 2008 12:24:21 +0000 http://www.thedividendguyblog.com/the-pros-and-cons-of-selling-covered-calls-on-dividend-paying-stocks/#comment-50040 If you're interested in covered calls you may want to check out My Covered Call Blog. If you’re interested in covered calls you may want to check out My Covered Call Blog.

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