... more than just covered calls!
Are they suggesting what to do next?
These questions seem to all have a common thread. They are presented because of the underlying principle of Systematic Covered Writing which states . . . Nobody Knows. What can the investor do if 'they' are wrong? Sometimes bad things happen to good stocks. An investor needs a system (a strategy, a plan) that works with both the good, and the bad trends, and not on just on new positions, but also on positions that end with the call option expiring. The covered writer maintains Systematic Covered Writing is such a system.
Review: Click this link to review the Basic Principles. (PRINCIPLE ONE provide below for convenience.)
The belief system behind any investment strategy or philosophy should be understood and adopted prior to any assets being invested. What follows is the foundation of the belief system behind Systematic Covered Writing. One can agree with the statements made or one can disagree. If 'agreement' is the path taken then an understanding of the foundation behind the strategies will be the destination.
PRINCIPLE ONE -- When considering any individual equity, in this case a stock, it is important to recognize that when one comes right down to whether the value of the equity will go up, go down or stay the same ... it is fundamental to acknowledge that NOBODY KNOWS.
One analyst feels a stock is going to go this way and yet the stock winds up going that way. Yet another feels the market will go that way and it winds up going this way. Confusing? Yes it is, and so is the market. Don't kid yourself. There is no magic formula, no exact set of parameters and no technologically advanced computer system that can consistently predict the movement of a stock. Otherwise someone would already own all the chips.
In accepting the concept that there is no 'needle in the haystack', an investor can stop looking for that 'needle' and be confident that when it comes right down to it ... NOBODY KNOWS anyway. Contemplate this -- whatever stock someone is buying ... someone else is selling and what ever stock someone is selling ... someone else is buying. The point ... don't both the buyer and the seller think they are right?
SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised:
02/05/07