We previously stated that writing (selling) just out-of-the-money covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week, our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over one year.
The risk in selling covered calls entirely comes from the market movement of the underlying security. When she owned NVAX, it dropped to a greater, far greater, extent than the premium income derived from selling covered calls on the security.
What did she learn from that experience?
First, pay attention to habit number three, which states buy the American market as a whole and do not pick stocks.
Secondly, she learned to write (sell) covered calls sufficiently out-of-the-money to earn about 1% per month or slightly more. That would significantly reduce the possibility of being assigned!
What did she do when the NYSE opened at 9:30 AM yesterday?YOU NEED TO LOGIN TO VIEW THE REST OF THE CONTENT OR LEAVE A COMMENT. Please Login. Not a Member? You can now sign up for $12 for a one-year membership. Join Us