Having lost $US10,990.00 in her “fun” portfolio in one year writing (selling) covered calls, our fearless intrepid investor got five takeaways from the experience.
- Only a write (sell) and never buy covered calls and cash secured puts.
- Do so on the first trading day of the week (usually a Monday).
- The expiry date of choice is the last trading day of the week (usually a Friday).
- The ideal underlying security is an exchange-traded fund (ETF) that tracks the S&P 500. SPY is the number one choice.
- If assigned in a tax-advantaged portfolio, American investors should write (sell) cash-secured puts just in-the-money. Canadian investors are not allowed to write (sell) cash-secured puts in a tax-advantaged portfolio so they need to buy board lots of SPY to allow them to write (sell) just out-of-the-money covered calls on SPY.
How did she make out last week, and what will she do today when the market opens today?