- Page 1/4
- Next Page
Calling Covered Calls back? It depends on the relationship between the price of the stock and the option. Quite often, when he has sold them out 6 months, he just waits and sees. If the stock basically stays in the same place, and he can buy the option back for $0.25 on the dollar, he does that and then buys another right away. If it starts going deep in the money, that eliminates the time value of the option too, so he can take a loss on the option and do well in the stock.
Preferreds got really clobbered this year, and are down about 24% on the year. A lot of institutions were buying them because they were representing pretty good value and paying about 6%. Has bought a little bit for some clients that were looking for yield. Doesn’t particularly like preferreds because you are basically exchanging the yield of a bond with the risk of a stock.
Writing Naked Puts? A Naked Put gives people the right to sell you a stock at a certain price. If the price of the stock goes down, you are still on the hook. Basically you are selling a Put and you have cash to cover it. It is the flipside of a Covered Call. The strategy works until it doesn’t, and he has seen this happen many times. Because the people who are doing Put writing are never actually taking delivery of the stock, it is all treated like income unlike Covered Calls which are treated as capital gains.
(A Top Pick Feb 17/15. Down 9.16%.) This is down because there was not the pickup from the US$, as well as all the questions about mispricing among the big pharmas. Still likes this, because it is not that big on just pharma, but is also in hospital management and different kinds of services. Thinks there is going to be a pretty good market for health services over the next several years. If there is any weakness in it, buy it.
Basically a closed end fund. This pays about a 14% dividend. When you look at the stocks in this fund, primarily banks and some of the oils, none of them are paying that kind of a dividend, they are paying 4%-5%. When you find something that pays 14%, it is not time for a pat on the back, but is a time to say “look at this more closely”. The company uses Covered Calls on this. He has been using Covered Calls for 30 years, and has never been consistently able to get 14%, so there is something else going on. There has to be leverage of some form or another. You need to look at this more closely and see what is going on.
US Markets. It is very sluggish and there is nothing to get terribly excited about, but they are pretty close to full employment. There are rising wages and low interest rates, and it is a great capital market. He is overweight the US by about 35%. There is probably going to be some kind of a rollover coming in here to a degree.