Selling Covered Calls

I never really thought about it, but a good strategy would be to sell out of the money puts at your loss point depending on if you’re bullish on a stock. I always tell myself I should set stop loss orders at -5% on all my stock purchases, but I never do, and it ends up hurting my portfolio. This way, I could make some extra cash immediately from selling the contract, and the worst case is I have to sell the covered stock at the price I want!

Also, I could double that money buy selling an out-of-the-money call at my desired profit point – sure, this would be limiting my profit, which is normally unlimited, but I generally sell when I make 20-30% anyway, so why not make money on options when this doesn’t happen (which occurs more often)?

Update: I was wrong, I want to buy the puts or sell in the money calls. Selling in the money calls is a much better plan, since I can make a little premium going in, and still be protected from downside. Here’s a whole article about it.