Apple Inc (AAPL)

[KCMW]

Good feedback all -

Thanks, Tex, WLD and Linda for the input - you have me thinking, and that is what I need to keep challenging my approach. IMO, every investor needs that.

Screening Stocks - Yep, there are plenty tools and data out there. I need to do some digging. Sometimes, when you ask, the internet delivers what you want on a silver plate . I guess some of my lack of motivation to do the *hard* work, is I often find the study is not conclusive enough to tell me anything useful. I've done a few like that already. I'm highly suspicious that is the case for what I'm looking for - I'm going to see if I can whittle down a few elements and have a go at it.

WLD - 'more comfortable selling' - Hmmm, my perception is just the opposite. When I talk covered calls to people, I get all the negatives and little interest because you never hit a 'home run', and you do have the risk of striking out. And, it takes some cash to implement. I get the impression that people are obsessed with two things - home runs AND never striking out. Agree, people have trouble with the risk-reward thing.

'Losing' - I think one reason I've been successful (to date) with CC and also some short term trading is that I'm able to take a good profit and be satisfied with it. I don't get hung up on, 'if I held the stock I would have made more', or 'if I didn't sell the call, I could have made more'. I think most people just can't get over that, and CC won't work for them. I've just seen too many people watch a 10-bagger go right own to zero! I would turn Linda's statement around: not how much gain did she give up ($150K), but what did you gain selling the call? Was that a good annualized gain? If so, you should be happy, if not, why sell the call in the first place? I think Tex made a similar statement about getting called out early and 'losing' - hey, if I get called out early, I'm happy. I made what I contracted for, and I can put that money to work somewhere else. I just seem to have a different outlook on these things.

Risk of owning the stock - No way around that, is there? Put it in the 'No Free Lunch' category. I will tally up some numbers later, but yes, I've been hit. The CC provides 5% - 10% of downside protection. So with 10 stocks, a 50% drop in one is a 4% drop in my portfolio. So far, my gains over losses have been consistently better than the market, but I sure cannot guarantee that. But, the market has been pretty flat - there should not be too many losers there anyway. I do one month contracts, I'm just not seeing too many stocks take big dives over the exact time period I hold them. My stocks track the QQQQ pretty well, so I don't think that is just luck, or good picking. Hence, I keep trying to refine and learn. I can typically get about 8% average downside protection each month, with a potential gain of about 35% annualized (based on the stock just staying above the in-the-money strike). So far, so good. My down months are all less down than the market.

Only way I really know of lowering your risk is to lower the amount you invest. Then you face the other risk - inflation.

I'll try to post later on my stock picking strategy for covered calls. - KCMW