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But when markets move quickly, the relatively small income generated by selling options is not enough to offset the decline in the underlying shares. Many funds have been simultaneously underperforming and suffering sharp swings.”
Well, covered calls don't have downside protections unless puts are also bought. But that will cut into the income/premium from calls. There are also funds with collars but their goal seems to be to just beat the money-market funds.
Well, covered calls don't have downside protections unless puts are also bought. But that will cut into the income/premium from calls. There are also funds with collars but their goal seems to be to just beat the money-market funds.
The only times I might collar a position is when it is nicely profitable (and usually only for a credit or tiny debit) simply to protect the gains .... but sometimes the numbers work out right and I can start a new position and put on a decent collar for a credit, which is the best-case scenario. Most times I will collar income-producing securities that are boring and generally not too volatile.
Basic covered call writing can goose one's returns, sure -- but as YBB says, you don't get much downside protection on that alone.
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There are also funds with collars but their goal seems to be to just beat the money-market funds.
Basic covered call writing can goose one's returns, sure -- but as YBB says, you don't get much downside protection on that alone.