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I would have to dissagree with alot of the comments made up until now regarding the risk associated with covered calls, especially in comparrison to other strategies such as Bull put spreads.


Try riding through a correction with an account full of Bull Puts. Your going to be decimated. You may even go negative on your account after closing costs.


On the other side a covered call strategy will easily ride through even the worst of market corrections. Yes your account will fall in value but it would be hard to imagine it loosing more than half of its value.


The second thing to consider is the opportunity to roll. If you have ever rolled an in the money Bull put spread you will know how painfull this is. Your success rate needs to be near 90% to be successful. Alternatively rolling a naked put or call will usually result in further credits being put into your account as long as the stock is not more than roughly 10% above or below your call or put.   This gives you a way out or a way to reduce your entry price or increase your exit price if the trade goes agianst you.


Thirdly, every strategy has its place you would not enter into a covered call strategy on a stock you believe is going to skyrocket. However history has shown us most stocks dont skyrocket. In fact the average yield from stocks is around 12%. Only 12% when it is relativley easy to yield 25%+pa through a covered call strategy, why would you bother sitting on a portfolio of large blue chip stock when you can sell calls on the highs and puts on the troughs to generate extra income from your portfolio. If the market rallies strongly roll up your calls to a higher strike so you still keep the majority of the gains or if the market tanks roll your puts down to a level your happy to buy. As long as your trading quality blue chip stocks that can withstand a market correction, your sure to do well out of a covered call strategy. As long as you are happy with 2-3% returns per month on your funds.


Just my 2c

I would class myself as an experienced options trader and these are the results i have found over the years. Before tearing my comments appart, consider maybe you are picking the wrong stocks if you are not finding the strategy very successful.


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