Author Topic: Selling covered calls as a retirement income booster?  (Read 2845 times)

sirdoug007

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Selling covered calls as a retirement income booster?
« on: May 22, 2014, 09:00:39 AM »
Not sure what I think of this strategy so I thought I would ask the mustachians here.

http://www.marketwatch.com/story/boost-retirement-income-with-covered-calls-2014-05-21?pagenumber=1

The basics are selling call options on stocks you own.  You would never lose money but could miss out on significant gains.  Not really sure how to evaluate how much gain you may have vs. gains you would sell to someone else but an interesting thought at least.

What do you guys think?

God or Mammon?

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Re: Selling covered calls as a retirement income booster?
« Reply #1 on: May 22, 2014, 09:22:38 AM »
Not sure what I think of this strategy so I thought I would ask the mustachians here.

http://www.marketwatch.com/story/boost-retirement-income-with-covered-calls-2014-05-21?pagenumber=1

The basics are selling call options on stocks you own.  You would never lose money but could miss out on significant gains.  Not really sure how to evaluate how much gain you may have vs. gains you would sell to someone else but an interesting thought at least.

What do you guys think?
Best done on broad market index (ETFs)

Would recommend rolling the calls up (in strike) and out (in maturity) if, as you get close to expiry, the calls are deep in the money - the risk being you get exercised early if they are way in the money with still lots of time left

brewer12345

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Re: Selling covered calls as a retirement income booster?
« Reply #2 on: May 22, 2014, 09:26:06 AM »
Not a great idea on a regular basis as we are supposed t o be long term investors and not trying to time the market that much.

That said, I sell the occasional covered call.  When I do so it is generally on an appreciated position that I want to lighten up on or exit entirely, usually due to valuation concerns or the fact that something has become a big concentration for me. 

foobar

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Re: Selling covered calls as a retirement income booster?
« Reply #3 on: May 22, 2014, 10:11:57 AM »
So you get all the risks of stocks with none of the gains?:) Yes that is way too simplistic but it is important to realize what capping your gain does to long term results. Covered calls are not a free lunch.


Not sure what I think of this strategy so I thought I would ask the mustachians here.

http://www.marketwatch.com/story/boost-retirement-income-with-covered-calls-2014-05-21?pagenumber=1

The basics are selling call options on stocks you own.  You would never lose money but could miss out on significant gains.  Not really sure how to evaluate how much gain you may have vs. gains you would sell to someone else but an interesting thought at least.

What do you guys think?

Nords

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Re: Selling covered calls as a retirement income booster?
« Reply #4 on: May 24, 2014, 12:03:06 AM »
What do you guys think?
I think that you're taking on additional risk and a lot of additional labor for which you may not feel adequately compensated.

If you're going to do this then read McMillan's options textbook:
http://www.amazon.com/Options-Strategic-Investment-Lawrence-McMillan/dp/0735204659
You can find a recent edition at your local library.

I'll say it again, this is work.  If you do it wrong then you're wasting your time and losing out on additional gains.