Keen newbie trading covered calls

wayneL said:

x% per month return is totally the wrong way to look at covered calls. If it were that easy, the gurus would just systematically write CCs and be done with it.

They don't.

Let's look at this a different way.

Supposing you own a basket of shares; you have two choices, just hold the share or systematically write calls over them.

Which is going to perform better?

In a rampant bull market, the CC strategy will underperform, just holding the shares will do better.

In a stagnant or bear market, the CC strategy will outperform the straight out share portfolio. You might not make a profit, but you will lose less.

...but in certain circumstances, the CC strategy will work against you over a series of trades no matter what the market is doing overall.

"Insurance" changes the structure of the returns because of how it affect the Greeks. A covered call with put insurance is simply a synthetic bull vertical spread, AKA a "collar".

This strategy has its uses and is a good one in the right circumstances, but it is no Holy Grail, despite what the seminar clowns say.

...and please do not use the term "share renting". It is inaccurate and misrepresentative of the mechanics of the strategy.

Anytime you hear someone waxing lyrical about "share renting", think to yourself - "muppet".

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