Covered calls in a $5,000 portfolio

Brucethethinker

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I'm going to see if I can't make 25% return in 2015 on a $5,000 portfolio using covered calls. If I fail, you can all mock and taunt me and tell me how foolish I am. I'll document every trade as it happens.

2-20-15, I bought 400 shares UCO at $8.36, total cost: $3,351.95, Cash remaining, $1,648.05.

Monday I'll sell some covered calls, or maybe not. Wish me luck!
 
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Brucethethinker

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I planned on waiting until Monday to sell covered calls, but just before closing Friday I sold 4 contracts, March 20 $9 calls for .60.

2-20-15, I sold 3-20 covered calls for $228.90. Total cash: $1,876.95

Value of stock (400 shrs UCO) = $3,356, total portfolio = $5,233, 1.04% increase.
 

fmdog44

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Sounds like fun and if you hit 25% it will be even more fun. Returns aren't what they used to be so you have your work cut out for you. Good luck.
 
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Brucethethinker

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I was thinking about buying some more UCO yesterday when got below $8. But, I don't want to be out of cash if it goes below $7 again, which it could. Today it's up big, at $8.51. So I'm up about $280, a little more than 5%. My goal is to make $1200, which would be $100 / month.
 

william the wie

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covered puts are usually more profitable than covered calls.
 

Flopper

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I'm going to see if I can't make 25% return in 2015 on a $5,000 portfolio using covered calls. If I fail, you can all mock and taunt me and tell me how foolish I am. I'll document every trade as it happens.

2-20-15, I bought 400 shares UCO at $8.36, total cost: $3,351.95, Cash remaining, $1,648.05.

Monday I'll sell some covered calls, or maybe not. Wish me luck!
Best of Luck! I wrote covered calls for a couple of a years. I probably made about 25% one year and half that the next. It's really important that you have a clear strategy as to what you going to do. Calls with potential for profit can move fast and you need to do likewise.
 

william the wie

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I'm going to see if I can't make 25% return in 2015 on a $5,000 portfolio using covered calls. If I fail, you can all mock and taunt me and tell me how foolish I am. I'll document every trade as it happens.

2-20-15, I bought 400 shares UCO at $8.36, total cost: $3,351.95, Cash remaining, $1,648.05.

Monday I'll sell some covered calls, or maybe not. Wish me luck!
Best of Luck! I wrote covered calls for a couple of a years. I probably made about 25% one year and half that the next. It's really important that you have a clear strategy as to what you going to do. Calls with potential for profit can move fast and you need to do likewise.
I prefer covered puts because I like getting into boring issues at the lowest price possible.
 
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Brucethethinker

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With the price of UCO being down big today, I bought 200 more shares at $6.25, $1,257.95 total price including commission. So I now have 600 shares of UCO and $619 cash. UCO is $6.35 right now, so my total value is $4429. I'm down 11%.
 
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Brucethethinker

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My average cost now is $7.69 / share. The current price is $6.35. My 4 covered calls expire at the end of this week, then I'll be able to sell 6 more covered calls. I hope the price is up a little, but all it's done the last few months is go down.
 
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Brucethethinker

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My average cost now is $7.69 / share. The current price is $6.35. My 4 covered calls expire at the end of this week, then I'll be able to sell 6 more covered calls. I hope the price is up a little, but all it's done the last few months is go down.
UCO closed today at $6.79, so my 600 shares are now worth $4,074, plus my $619 in cash = $4,693. Down $307 overall.
 

Rocko

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Covered calls is an easy way to generate income. All you have to do is pick options that pay out generous premiums. That and make sure your broker isn't ripping you off with commissions.
 

Rocko

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The reason why I don't really do covered calls is I hate limiting my upside. I'm an all or none investor.
 

Flopper

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The reason why I don't really do covered calls is I hate limiting my upside. I'm an all or none investor.
That sounds more like speculation than investing.
 
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Brucethethinker

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Just now I sold 6 contracts, $8 call, expire on July 17, for .86. My net is $503.33. So I now have 600 shares and $1,122.33. With the current price being $6.80, my 600 shares are worth $4,080. So, my net $5,202.33, making me up about 4%. Now, keep in mind my average cost is $7.69, and it's now trading at $6.80, yet I'm ahead! That's the beauty of covered calls. I have some cash to buy more stock if the price goes below $6, which it might! I didn't want to sell calls that expires so far out in the future, but I had to in order to get a decent premium.
 
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Brucethethinker

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The reason why I don't really do covered calls is I hate limiting my upside. I'm an all or none investor.
Ok, but do you ever take profit? When does it go up enough for you to say ok, I'm cashing in. Perhaps you're saving for retirement, so you know you won't need to sell for a few years. You can sell a covered call that is way out in the future, and get a large premium. If you buy UCO now at $6.80, and sell a $10 Jan 2017 call. You'll get a $1.90 premium, meaning your net cost for the UCO will be $4.90. If UCO is over $10 in Jan 2017, you'll have doubled your money, because it went to $10. To double your money without selling covered calls, the $6.80 UCO has to trade at $13.60.

Suppose UCO goes up to $15. Then you'll be ahead not selling the call, but not by much. On the other hand, if UCO goes down to $5, you'll lose 25% if you don't sell covered calls. If you sell covered calls, and UCO goes down to $5, you'll still be ahead!
 

Rocko

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The reason why I don't really do covered calls is I hate limiting my upside. I'm an all or none investor.
That sounds more like speculation than investing.
The reason why I don't really do covered calls is I hate limiting my upside. I'm an all or none investor.
Ok, but do you ever take profit? When does it go up enough for you to say ok, I'm cashing in. Perhaps you're saving for retirement, so you know you won't need to sell for a few years. You can sell a covered call that is way out in the future, and get a large premium. If you buy UCO now at $6.80, and sell a $10 Jan 2017 call. You'll get a $1.90 premium, meaning your net cost for the UCO will be $4.90. If UCO is over $10 in Jan 2017, you'll have doubled your money, because it went to $10. To double your money without selling covered calls, the $6.80 UCO has to trade at $13.60.

Suppose UCO goes up to $15. Then you'll be ahead not selling the call, but not by much. On the other hand, if UCO goes down to $5, you'll lose 25% if you don't sell covered calls. If you sell covered calls, and UCO goes down to $5, you'll still be ahead!
You still have more of a chance of doubling your money or better if you buy the common stock, and your not married to it for such a long time. When I did write coverd calls, I did it on a month to month basis, so I gave myself some options as far as what I wanted to do with my money.
 

william the wie

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The reason why I don't really do covered calls is I hate limiting my upside. I'm an all or none investor.
That sounds more like speculation than investing.
I'm with Graham on this one, speculation is not illegal, immoral or fattening just extremely difficult. That from a guy whose 1926-56 4xDJIA average is twice as good as the closest runner up, his student Buffett.
 

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