In the previous post I alluded to a major benefit of covered calls that sometimes forces you to get rid of a stock for a capital gain.
"Investors are always trying to time the market. They want to get in at the lows and get out at the highs. While this simplistic goal sounds easy, it is almost impossible to achieve."
It definitely has been very difficult for me to achieve. The major problem in achieving this goal is we don't know and can't decide "how low" and "how high."
With my covered calls strategy, I don't much worry about how low when buying a stock. I only consider the quality, dividend yield, and potential to grow. Then immediately I sell a weekly call on it with a higher strike price (at least 1% higher). I earn a premium. If the call is assigned then I have sold the stock at a gain, may be the stock will move even further up in the days following assignment, it does not matter. I have sold the stock at a gain. Buy low, sell high accomplished.
It gives me an opportunity to further study the volatility, trading volume and based on my learning I may buy the same stock again (at a price lower than I previously sold at) and sell a call on it.
Stocks go up and down; if you are patient, you can buy a stock at a price lower than previous call strike.
"Investors are always trying to time the market. They want to get in at the lows and get out at the highs. While this simplistic goal sounds easy, it is almost impossible to achieve."
It definitely has been very difficult for me to achieve. The major problem in achieving this goal is we don't know and can't decide "how low" and "how high."
With my covered calls strategy, I don't much worry about how low when buying a stock. I only consider the quality, dividend yield, and potential to grow. Then immediately I sell a weekly call on it with a higher strike price (at least 1% higher). I earn a premium. If the call is assigned then I have sold the stock at a gain, may be the stock will move even further up in the days following assignment, it does not matter. I have sold the stock at a gain. Buy low, sell high accomplished.
It gives me an opportunity to further study the volatility, trading volume and based on my learning I may buy the same stock again (at a price lower than I previously sold at) and sell a call on it.
Stocks go up and down; if you are patient, you can buy a stock at a price lower than previous call strike.
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