It is Jan, time for I-bonds. In case if you haven't

[dividends20]

@MarkR

Covered call requires a lot more capital outlay … need to buy each share for ~$308 and sell the call for ~$10, that’s net $298. Over the year, that $298 alone is costing you about 4.5% alone in foregone interest.

I have found that buying leaps is an excellent strategy, especially on volatile days. You can then place covered calls on leaps on a good day and recoup your investment.

Here is one transaction I did (showing for 1 option)

[Kingran]

@MarkR

Covered call requires a lot more capital outlay … need to buy each share for ~$308 and sell the call for ~$10, that’s net $298.

If you are going to keep the cash sitting in the account, then covered call gives you much better rates. Also, keep in mind, if you do the covered call today you lock in the rates for the duration and if the rates drop later your cash securing the puts will earn less. Separately, not every brokerage gives you good return on the cash, for ex: I can get better rates in IBKR vs E*Trade.

My covered call vs puts decision are driven by extensive excel calculation which includes dividends, annualized yield etc and also the strike price are identified based on support, resistance, and moving averages etc. Separately, depending on the account, the strategy I chose is also different. Any strategy I choose requires some downside protection and yield. I generally don’t write so close to the current quote, only exception is, I want to take the shares and start writing covered call. If I want to buy, then I just buy. Options are very different strategy than owning stocks.

Last year, while my core stock holding performed in line with SPY, i.e., down, my option strategies and trading account enabled me to have a positive year. So, I don’t do this for “Playing”. It is an integral part of my overall hedging and investments.

However, I do caution folks to understand what they are doing, especially if you think Put premium is free money, then it is not.

[MarkR]

@Kingran

However, I do caution folks to understand what they are doing, especially if you think Put premium is free money, then it is not.

I’ve been giving that kind of caution for years, even decades. To both put sellers and call sellers. When you sell an option, you aren’t selling something of no value, on the contrary, it has great value to the buyer. With few exceptions, those buyers are rational investors and not giving away “free money” (recent exceptions include the meme stock craze*).

* And you can see that clever and nimble management can take good advantage of irrational meme stock investors, most recently in BBBY, and last year in AMC.

[zbuilder]

Isn’t it $10K per person, per year, allowing multiple i-Bond accounts per person?

[Kingran]

$10K per person for a calendar year is the limit. However, you can buy i-bonds for additional money with an intent to gift. Also, if you are using tax return to purchase then you can buy additional $5k