The Covered Calls Farm
Planting and Harvesting Covered Calls for Fun and Profit using a Farming Strategy
Farmer Ron's Market Comments
Farmer Ron on a Cruise to Alaska. We all need to keep a good balance with family, health and wealth. Plus, always have fun as life is
Updated: January 16, 2012
June 17, 2013
I am still a very strong advocate of the Covered Calls Strategy. The one area that I have been working
on to improve is the quality of stocks I select to write calls. It's easy to find high premiums with
high risk stocks and in an up market they usually do great. You do a buy/write and the next thing you know they are being assigned or the call expires and you can re-write with a solid premium.
The issue is when the market begins to turn down and while you make a lot of money in call premiums you lose on the stock value decline. Overall, I have been successful in making profits in down markets but
not at my desired level.
I have always been a fan of Investors Business Daily and the CAN SLIM system. So, I have been spending a lot of time reading the many books and applying the concepts to stock selection and selling. To really
get to understand how this works it's difficult with covered calls. The problem is when a stock declines the
system has a 8% stop loss feature as well as other sell points based on chart patterns and falling through moving average lines with certain trading volumes. This is very difficult to accomplish when a stock
is covered. The call's premium can bounce up in percentage when a stock declines.
So, I decided to apply the CAN SLIM without covered calls for a period of time to see how it works.
My goal is to eventually start writing calls on a portion of each position. I'm hoping to continue success
in profitability along with the advantage of covered calls.
I am thinking there is a solution for protecting yourself in a dropping market with a stock that is covered but
have not come up with what I would do as of yet. Always can close the position but the calls sometimes
makes the loss worse.
More to come. Ron