PowerOptions WeBlog

Conventional Approach

The conventional approach for protecting a portfolio against a large loss, research, buy-and-hold and diversification works well for singular events like an Enron or a Worldcom. However, for systematic market problems this approach can be very painful, as the stock market can drop significantly with very few stocks maintaining their value.

The stock market can behave crazily at times as in the case of Technology Bubble, Lehman Brothers, Housing Bubble, Credit Crisis, Debt Ceiling, etc. Investors can be taken for very painful rides during market events such as these.

(to view archived version of this presentation click the video below)

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By blue chips and dips, we’re not talking about those fancy blue corn tortilla chips with salsa, no we’re talking about Covered Call positions for stocks of blue chip companies or very large companies.

Most Well Known Stock Option Strategy

The Covered Call strategy is the most well known stock option investing strategy. The Covered Call strategy is easy to implement and is less risky than many other stock option strategies. Entering a Covered Call position entails purchasing a stock and selling a call option against the purchased stock. The Covered Call position can return a higher return than experienced by the plain-old long stock position, and the converse is also true, the long stock position can return a higher return than the Covered Call position. A typical potential return for a Covered Call position is around 2-3% over a timeframe of one month.
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During this open discussion presentation, Mike Chupka, PowerOptions Director of Education handles questions from customers such as:

1. “What is the expected monthly return for covered calls, vertical spreads, diagonal spreads and the RadioActive Trading Techniques?”

a. This leads to a conversation at the 30 minute mark: “One of your competitors claims they make monthly returns of 3-6% for covered calls; 6-10% for diagonal spreads and higher for vertical spreads…”

(To view the video, select below)

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This presentation focuses on using the PowerOptions Search tool to identify Long Calls and Long Puts, comments on analyzing a Long Call or Long Put with the Research and Analysis links, using the ‘Optimized Long Option Finder’ (only found on PowerOptions) to evaluate which Long Call or Long Put might give you the best ‘bang’ for your buck, as well as tracking the positions and the PowerOptions Portfolio tools and evaluating potential Roll Out Opportunities or Adjustments using the Position Analysis Screen and Simulate Trade feature.

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