As many of know I'm a big proponent of conservative option selling strategies, known as covered-call writing and selling cash-secured puts on a monthly basis. Here on SA, dividend growth investing is by far the most attractive topic that determines the best opportunities which can help investors live off their dividends. But what would happen if you sell covered calls on stocks you have been owning for quite some time now? Or what about selling cash-secured puts to purchase a stock at discount in lieu of setting an ordinary limit order? In this second episode, I'm going to present you the best five names that conservative long-term option sellers should heavily consider right now.
By selling options on stocks we'd like to own, we target annualized returns exceeding the 10% level in order to get sufficient premia while receiving a substantial discount if the shares are put to us by expiration. This helps not only reduce our cost basis, but we can benefit from a high IV rank which measures historical volatility against current volatility. The higher, the more contraction in volatility we'll tend to see, which benefits the option seller.
Selling covered calls combines upside potential, premia and corporate dividends we may receive along the way. It's essential to successfully rebalancing our portfolio in order to part with the most overvalued stocks.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.