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Author: Zumba Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 11009  
Subject: Re: Pros & Cons of Selling Covered Calls for Inc Date: 5/13/2013 11:14 PM
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I agree that now is a lousy time to be selling covered calls - the market hitting all-time highs and the VIX is low.

Different people sell covered calls for different reasons, but I use them as a bullish strategy - I WANT to have the stock called away. My goal is to make a modest capital gain on the stock, plus the call premium. Get in and out fast.

The best time to sell covered calls is after a big sell-off in the market or in an individual stock. IV goes up as stocks crash, so if you can get in near the bottom you get the best of both worlds - cheap stock with room to rise, and high IV. Conversely, the worst time to sell covered calls is right about now - low IV and stocks with limited upside.

Some people like to sell calls as a way of generating income on long term holds, but don't do this unless you're ready and willing to see the stock called away.

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