You have owned shares of stock in your non-sheltered accounts for many years. Share valued has appreciated significantly over time. This has put a smile on your face. Many of these securities have also generated dividend income. This, too, has pleased you. However, there is a 3rd income stream that you can activate right now, leveraging these same stocks, using a strategy known as covered call writing. This is a low-risk option selling strategy analogous to generating rental income with a real estate investment property. Yes, renting out your stocks for limited periods. We have 2 goals: generate a 3rd income stream + retain the underlying shares to avoid negative capital gains issues. This presentation will analyze how to implement this form of covered call writing, known as Portfolio Overwriting, always with capital preservation in mind.
Covered call writing and selling cash-secured puts are low-risk, option-selling strategies focused on generating cash-flow. Our trades can be structured to represent aggressive or defensive inclinations or somewhere in between. This presentation will detail how to establish our trades to decrease risk, particularly in bear, volatile and uncertain market conditions, while still generating significant returns. It will also be of particular interest to investors who have a low personal risk-tolerance but still want to generate higher than risk-free returns, while, also, avoiding exercise of the options (sale or purchase of the shares). Both Delta (an option Greek) and implied volatility will be spotlighted, and real-life examples will be utilized to demonstrate the process of establishing these conservative trades, while, simultaneously, allowing us the potential to generate meaaningful annualized returns. A comparison of these ultra-low risk returns to traditional option-selling will be presented, using real-life examples.