Disclosure: I 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
In the endless search for yield, a covered-call strategy can be an effective tool to supplement portfolio performance. In addition to finding returns from call premium, I'll try to incorporate higher quality dividend stocks for a little something extra. The guidelines for the covered-call strategy are:
• Generating more than 7% per year from the calls and dividends combined is the overall goal.
• Call should be at least 8% out of the money (OTM), to avoid being called away and to give room for underlying movement.
• Targeted expirations will be within four months. Optimally calls will be written on the same underlying 3-4 times per year.
• Buying back calls to close before expirations takes place will be taken into account; yields are calculated bid-$0.05.
The picks should be looked upon as yield generators to supplement longer-term equity holdings. The above are only guidelines, however, not rules. Before utilizing the strategy, make sure to study it and know the potential hiccups that may occur. READ FULL ARTICLE HERE