Originally Posted by
mike734
If the proponents of selling covered calls can be believed, one can make two to four percent per month with this strategy with low risk. So far it looks to me to be fairly straight forward and doable. I'd venture to say most retiring pilots on this forum have over one million in their IRAs. Two to four percent per month looks like a good retirement income. Have any of you done this?
Covered calls in this environment is a bad game. At best, the stock takes off on a COVID rally tear, gets called away, and you lose profit. At worst, it crashes and you're stuck holding the bag. If you sell quickly you'll just lose the premium, but if you don't, then do you sell another call and hope it doesn't take off again cutting your 'break even' to a loss or hold on and hope it doesn't tank further? Covered calls are great with a stable market where you can make a few bucks on a sideways stock, but right now... it's too volatile. The market is chock full of manipulation and options just expose you to the worst of it. The days with the biggest gains were always within a few days of the biggest losses during past recessions and corrections; covered calls effectively expose you to the losses and cancel your gains.
Regardless though, after all this quanitative easing from CARES and now HEALS, we'll be lucky if the USD is still the world's reserve currency. Trump effectively quantitative eased an entire year's budget. Normally, the way money works is you provide a good or service, earn a dollar, the govt takes that dollar, gives it to someone who needs it more than you, and they buy a good or service with that dollar. Regardless, a good or service was provided at both ends of that transaction. With quantitative easing (running the presses), the govt just gives a corporation or someone out of work, a dollar. There was no good or service provided on the front end, so it just dillutes the value of dollars already in circulation. Right now we enjoy the 'reserve currency privilege' of mortgage level interest rates on our debt while the rest of world pays credit card interest on debt. We rely on debt; it's like 25% of our budget. As the dollar gets devalued, the interest we'll owe will be higher. The good news is if you have a ton of student loan debt, massive inflation will make your debt "cheaper." The bad news is our country may get stuck in a revolving debt cycle, much like those people who take out payday loans
Supposedly the best bet is diversification because cash, gold, stocks, bonds, real estate, international, etc could all fall apart or thrive. Nobody knows.