Your neighbor bursts into your house and exclaims “I just read this article…You buy a stock and sell an option and cash flows into your account instantly. It’s a miracle! I’m getting started tomorrow” If you are a good neighbor and knowledgeable about covered call writing you will immediately tie him to a chair, put tape over his mouth and explain to him that there is no such thing as a free lunch.
There is so much more to this strategy than what your neighbor read in the article. The most vulnerable investor is the one who thinks he knows everything but in reality knows very little. He must learn when to begin risking his hard-earned money and what his goals should be. Should we look for the highest returns? Many covered call writers do. As a matter of fact, some subscribe to newsletters that generate lists of the highest ranked stocks based on option returns…very dangerous.
Since there are two components to this strategy which is more important, the stock or the option? Which option do we select? If your neighbor is not prepared to answer these questions, he is not ready to execute trades. What if the trade turns against him? Can he control the outcome? He doesn’t know! Didn’t think of that… well then he’s still not ready…keep him tied to that chair.
Explain to Mr. About-to-be-broke that there are pitfalls to watch out for. Tax issues…maybe. Has he decided on which brokerage makes the most sense using this great strategy? No…the tape stays on. Give him a pen and paper. How many positions should you hold? How much cash should be allocated to each position? Specifically, which system will he employ? If the paper remains blank, show no mercy. You’re simply being a good neighbor and he will thank you for it.
Okay, it’s time to show some compassion here. Tell him that if he agrees to watch this brief video, you will release him from this bondage, remove the tape and give him the opportunity to become CEO of his own money:
Here is part of an email I received a few days ago from an impressive new member who is the opposite of Mr. About-To-Be-Broke:
Your Books, Your Blog, Your Video’s all fantastic!! Clean, sharp and logical!!
The system/report is going great, I am now into my 6th month of paper trading and I’m about to go live in the next couple of weeks. My returns have been 2-5% per month over this period, which when compounded is a fantastic return.
So thanks for that:)
Master the strategy– Practice the system- Generate Cash- Become CEO of your own money.
Next Speaking Engagement:
New York City, NY
- Retail sales increased by 0.1% from January, up for the 3rd consecutive month
- Business inventories ( A report of the dollar value of product inventories held by manufacturers, wholesalers, and retailers. Included in the report is the inventories/sales ratio, a gauge of the number of months it would take to deplete existing inventories at the current rate of sales, which is an important indicator of the near-term direction of production activity) rose slightly (0.1%) but less than the 0.3% anticipated according to the Department of Commerce.
- Initial jobless claims for the week ending February 9th came in at 341,000, less than the 360,000 expected
- Industrial production (a measure of the changes in quantity of physical materials and items produced in the manufacturing, mining, and utilities industries. Industrial production and capacity utilization are significant indicators of trends in the industrial sector) dropped unexpectedly in January by 0.1% while experts were anticipating a rise of 0.2%. However, revised data for November and December produced the first back-to-back increase in 30 years
For the week, the S&P 500 rose by 0.1% for a year-to-date return of 6.8% as shown in the chart below:
IBD: Confirmed uptrend
BCI: Moderately bullish favoring out-of-the-money strikes 3-to-2