It is hard to understand why more income investors don’t use the covered call strategy more often. Once you sell the call you have an automatic income amount set for you. Perhaps the biggest reason more people don’t write calls is they are not aware of the strategy. Unless you stagger upon the strategy or research it online, it is difficult to understand.
Most financial institutions do not mention covered calls as a strategy to their clients as they may risk losing business if clients pursue this strategy on their own. These advisers are being paid commission on the amount of funds they manage so they have a conflict of interest with their clients. Simply, they make money on the products you buy from them.
There is a certain amount of fear involving the trading of options. Some resources lump together all option strategies as being too risky for an individual investor to use in their own portfolios. Yet, these same “experts” will suggest you buy a small cap growth stock trading at a 100 price to earning ratio.
By producing cash flow from an asset DOES NOT increase the risk of owning the asset. think about this: all investors should seek a return on their money which is cash flow. Of course, if you are in the nail business you always recommend hammers! You must realize that your interests are different from the financial institutions. And you are the only one to focus 100 percent on your needs. However, financial advisers make money when you do and when you don’t! Your biggest decision is to rely on their advice or handle your own investing.
This blog believes in the individual investor and his ability to generate monthly income from writing covered calls, selling puts for premium and owning monthly dividend paying stocks.
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