BUT if the share keeps rising you have to dig into your personal cash to buy another 1,000 shares of the stock and are in the position where it can cost you more to buy back in than you receive in 'rent' from covered calls for a number of months.....
I watched one of those 'get rich quick' videos of a seminar. The guy talks convincingly about 'renting out' your blue chip shares. Anyone got any idea what the proper name for this is? i.e futures, warrants, options? He talked so vaguely about this concept that he didn't even say what it was called. But he gave the impression that once you had 50000 bucks to invest, you could replace your income.
Was this a Jamie McIntyre video by any chance??
Covered calls are a useful strategy in a market like now where you can offset your losses. You see the only real risk is the profit potential you might lose if they exercise you. Otherwise if your strike price stays out of the money your premium you collect will offset any falls in the share price. The time i wouldnt recommend such a strategy is in a bull market. This strategy shouldnt be used alone, i.e if a company is moving forward than just accept the capital growth its giving you (along with its dividends), but when its growth is stagnate or falling (in todays case for most) you can write covered calls to collect some "rent" (premium) which will offset the loss and keep you a happy customer. Short term covered calls are always good since you never know when the market will bounce back.
Hope this helps
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