LOOKING FOR A MORE CONSERVATIVE APPROACH?
COVERED CALL WRITING
Covered call writing is a more conservative investment strategy as compared to traditional stock investing. Think of being the casino. The concept for profit in the casino industry is to make steady profits from the gamblers you do business with while having a statistical edge. Covered call writing investors employ a similar concept. They profit off selling high risk bets to the gamblers buying call options on their stocks. With covered call writing, our clients purchase a sector diversified mix of 20-40 individual stocks broken out by S&P 500 industry sector. We then go to market and "sell call options" to speculators willing to make these high risk/high reward bets. We are essentially selling them the right to some of our stocks' potential appreciation for a specific amount of time in return for up front cash. While this process can cap your upside potential, it allows for a notable increase in the cash that can be generated from holding stocks traditionally. We find this strategy resonates with baby boomer investors searching for income who like the more conservative tilt vs. traditional stock investing.
Benefits of Covered Call Writing with a Fiduciary
We are paid a fixed % fee based on the size of your portfolio. We DO NOT earn trade commissions. Because of this, we can keep the fees on a covered call portfolio more manageable than is typical for a commissioned broker who is paid on each transaction.
Covered Call Writing for Endowments, Annuity Trusts, Uni-Trusts, Foundations, and Non-Profits
These entities often have a clear and conservative income-oriented investment policy or mandate. We feel strongly that our covered call portfolios (particularly in tax-free and tax-deferred accounts) can be a very suitable portfolio strategy for these institutions.
Diversification with REITs, Preferred Stocks, and Bonds
While building a sector-diversified equity portfolio for covered calls helps to minimize risk, we also mix in REIT exposure (public and privately traded), preferred stocks, and individual bonds as well as bond funds. We feel this mix provides the best balance of diversification and income potential for the client.