Income Generating Strategy
This is a strategy that I use with current positions that I do not care of they get called away as I will sell calls against the position. It is also the strategy that I will use to open a new position on a stock that I want to own by selling to open puts.
Income Generating Strategy
(Actual IGS account snapshots)
IGS - Projections
IGS - Grand Totals
Frequently Asked Questions
Why do you sell calls against the position?
I sell calls to generate premium income. I typically sell calls against the position at/near a resistance point. This will maximize the premium but at the same time, will cap my profits if they get called away.
Why sell to open puts?
If I am wanting to own a particular stock, I will sell a put that obligates me to purchase that stock at a specific price. In addition, I will collect the premium that can be used to offset my cost basis.
What if your calls go ITM?
That is the purpose of selling the calls. If they go ITM, then the shares will get called away and I get to keep the premium as well as the profit on the stock. The disadvantage is your profit is capped when you sell calls against your position.
Do you monitor your accounts daily?
I do not monitor this account daily. Once I have the common stock position and I sell a call (usually monthly calls) against the position, I just wait for expiration to see if they are called away or not.
Do you sell ITM or OTM puts?
That depends on the stock as well as the option premium available. My goal is to achieve as much premium as possible and you do that by selling ITM puts. There are advantages to selling either ITM or OTM puts.