Equity Covered Call Portfolio
In addition to the all ETF Covered Call Model we have two equity only covered call models as well, the Blue Chip Collared Dividend and the Aggressive High Dividend + Covered Call
Blue Chip Collared Dividend
This model usually holds about twenty different stocks that have a dividend yield of at least 3%. These stocks are all very liquid and are penny pilot issues. All of these stock will be a part of either the Dow Jones Industrial Average or the S&P 500 index. On a monthly basis we will sell call options that are about 2% OTM and every six months or so we’ll use some of the call option premium to buy put options that are about 8% OTM. OTM Stands for out of the money. We cap our max possible annual gains to about 30% and limits the worst case downside to about 10%. Nervous income investors will have some peace of mind knowing their worst case scenario at all times. In the event of a massive market sell-off, a “fat tail” event. Our worst case is established with put options. Stop orders cannot provide the protection that put options do.
Aggressive High Dividend + Covered Call
This model is for more aggressive investors who want high income. The dividend yield on these stocks ranges from 6% to over 10%. Many of these issues are small caps and all of them are optionable, but some of them trade thinly and can have some wide bid/ask spreads. For this model we sell options anywhere from one month to six months out and do not buy the puts, but instead use stop orders. The stops start at about 8% and are adjusted on a trailing basis using the chandelier methodology.