Sell Covered Calls, Naked Puts; Great Inflation Hedge
Momentum, Healthcare, Media, Selling covered calls, puts
Seeking Alpha Analyst Since 2007
Donald E. L. Johnson writes Picking Stocks, Options for Income about stocks, covered calls, selling puts and the markets. A retired financial and business reporter, editor and publisher, he frequently comments on SA articles and is a member of Yield Busting Corner, a free web site for traders of lower risk covered calls and puts. He began his financial writing career as a commodities futures reporter on the floor of the Chicago Board of Trade for The Wall Street Journal. He has reported for the Chicago Sun-Times, New York Journal of Commerce, American Metal Market-Metalworking News and Modern Healthcare, where he was editor for 10 years. He also owned a small business newsletter publisher. Johnson has an MBA in finance.
Summary
- A low-risk covered calls, naked puts strategy should beat inflation.
- Look for large companies with liquid and active options.
- No matter what we do, speculating and investing is a lot of work.
- If you can make the money you need to maintain your lifestyle and beat inflation, also holding a lot of cash is a good idea.
- No one can predict markets, interest rates or what politicians and dictators will do to mess them up.
By Donald E. L. Johnson
I've held a lot of cash for years along with dividend stocks, some high yield dividend investments and, for me, most important, stocks of big companies that attract and keep the attention of traders of covered calls and naked puts.
Indeed, if you can generate dividends plus options premiums plus at least small capital gains annually, you can easily beat inflation even if it goes as high as 10%. At the moment, that seems unlikely. But some of us lived with 20% inflation 40 years ago.
First, determine your annual budget. What do you need in Social Security income, dividends and other income to maintain or enhance your life style after you retire? Do you plan to cut spending in retirement, save for end of life medical emergencies or just wing it and hope for the best? Are you hoping to leave money to relatives, or are you effectively childless and don't know what to do with your money after you and your spouse die?
Hard questions must be asked. The answers aren't always easy or workable.
Based on what I see on SA, relatively few SA readers, contributors or traders are trading covered calls or selling puts for income. That is fine if you're doing some other things to hedge your risk.
No matter what we choose to do, we shouldn't and most of us can't just buy and hold, follow the advice of one person or another and spend most of our time in retirement playing.
My goal at this time in life is to go out without becoming and end-of-life burden on society or my family. No Medicaid for me, please.
So I and many others work hard. We read Seeking Alpha and other web sites and publishers. We subscribe to SA Marketplaces and other investment services that make sense to us.
And we pay attention to what's going on in the world and markets, like it or not.
I treat my trading as a business. It pays for more than beer, which I can't drink anymore, and trading keeps my mind busy and active without wasting too much time following sports or politics.
Analyst's Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CAT over the next 72 hours.
I am an old speculator, not a professional trader nor a financial advisor. This opinion piece is for educational purposes only. I do not take nor accept responsibility for how others trade. Trading stocks, options, futures and a lot of other things is risky. Life is risky.
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