You can combine the two strategies and do very well assuming you have the margin power to cover the put writing. I find writing puts, and using the premiums to buy high risk calls makes for some excitement with the feeling of not really losing money if the calls don't pay off. I've been writing puts every month on AMD over the last 2 years. I've been assigned the shares 1/2 dozen times and I decided to keep them each time because I believed AMD to be undervalued. My average price of those shares is now around $8.5 (yes I do have some way up there at around $20, but I also have some around $4). At times it seemed painful because the shares were underwater, but I had a good feeling I would get it all back someday, so I just held. Most of the time the calls I buy expire worthless, but this month was wonderful for this strategy. I'm way ahead of where I would have been if I had just kept the put writing proceeds. While I don't agree with Elmer's position on AMD, his strategy is very solid long term. At some point you have to be wise and stop the put writing, as the risk of the stock returning to much lower levels kicks in. For me, it is getting close to the point that I will stop writing puts on AMD. The risk of a major pullback is becoming too high, and I already have enough shares. I will soon start writing covered calls on my shares, and eventually I hope to be out of AMD completely (only to get back in again later by writing puts of course!). I may miss a huge run-up, but so be it. There will always be another opportunity to make money.
Just my strategy-
HailAMD!
