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Let's clear something away once and for all. It's what I think we are all saying in our own various ways, and that is that in the right situation, covered calls are a fantastic strategy.


In my opinion, the right situation is on long term holdings that are not currently trending strongly higher.


I would NEVER buy stock to write a call over.


The last time I traded CCs on my own account, was on a piece of dog crap I thought I wanted to hold for the long term... that was 2 or 3 years ago now. In other words it's a very rare occurrence for me, because of the time frame I operate in.


But I run a portfolio of buy & hold, dividend paying stocks on behalf of a trust which I took over last year. It was previously in the hands of an adviser at a major broking firm. Their idea was to churn the account for as much as they could get away with.


As my remit is to generate income for the beneficiaries, I have simply written calls when I thought I could get away with it. They think I'm a wizard. In this instance they are perfect.


But lets face the reality of the covered call promotion industry. It is full of BS, nonsense, dishonesty, misrepresentation and subterfuge.


The standard line is "make 40% per year with little risk".


PFFFFFFFTTTTTT!!!!!!!! Rubbish! The sites are setup to find CC opportunities only, usually high IV situations, but ref. my links above. The wrong way to go about it.


As a "trading" vehicle, they are suboptimal. The trading expertise required to maximise profit can be better employed with other methods for superior profits.


The problem is that "options trading" is sexy and sounds fantastic at dinner table conversation... and CCs seem to be the holy grail if you swallow the hype. The thing is, it still requires some skill and knowledge (especially CGT ramifications of assignment), even for a long term b&h portfolio, otherwise they can do considerable damage. Options nooooobs are not aware of all the traps (because the sheisters usually don't teach them).


Anyway, enough ranting for now.


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