In today's Wall Street Journal (July 8, 2009) there is a wonderful article written by James B.
Stewart, "A (Covered) Call For Caution On the Market".
His trading wisdom is a practical breath of fresh air to an overextended market.
Stewart says at the end of his article, "To me selling covered calls is a good lesson in curbing greed.
If a stock on which I have sold calls continues to rise, I still make money, even if it's not quite as much as I would have by simply owning the shares".
He continues, "If I can't tolerate earning a good profit just because I could have made even more, then something is wrong".
If the greatest obstacle to profitable investing are allowing "fear and greed" to influence our investment decisions, then initiating a life-long covered call program for our retirement accounts will doubled our odds of profitable investing over a lifetime.
If we can reduce losses because we became too greedy during times of economic excess, then we are well on our way to eliminating the emotional paralysis near market bottoms.
Paralysis caused by fear because we're trying to time the market and pick a bottom.
Covered call writing essentially pays us huge cash premiums to wait out market turmoil found near the lows.
Heck, even Warren Buffett sees covered call writing as essentially the same as collecting insurance premiums.
While his time horizons are 10 or 15 years out, the basics are still the same.
Don't let fear stop you from educating yourself about covered call writing.
Don't let the fear of missing the big rally (or is it greed?) stop you from doing covered calls in your accounts.
Taking a buy-and-hold approach to investing is a good thing, and using options on a portion of those same assets makes it a great thing.