If you're effectively selling naked puts, your MAX upside might be 8%, but your downside could be quite a lot larger than that -- I think that's what you are missing. It's the call that is "covered", not the actual stock, which could always gap down huge any given day, so those 3 losing months won't be mirror images to the 8 winners.
How To Turn $100,000 Into $48 Million
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If you're effectively selling naked puts, your MAX upside might be 8%, but your downside could be quite a lot larger than that -- I think that's what you are missing. It's the call that is "covered", not the actual stock, which could always gap down huge any given day, so those 3 losing months won't be mirror images to the 8 winners.
Somehow, "85% accuracy in finding tops and bottoms" and selling covered calls to take advantage of that just doesn't gel. Picking tops and bottoms is a low percentage play where you take many small losses until you finally hit the right turn and win big -- the opposite of covered call writing.
The only way 85% accuracy sounds right is if you constantly say "this is NOT the top/bottom", and were able to say that 8 separate times before the market actually turned. I suppose if this were the case, then selling premiums would make sense if they could accurately gauge that markets would be rangebound, but not exactly the first thing you think of when you read "85% accuracy in calling tops and bottoms". Sly marketing?!
Quote from marketsurfer:
honestly, i am not very familiar with bill oneil. i think its his canslim method they are refering to. many traders have been very succesful with the canslim method. i am not able to comment on the accuracy figures but they seem exagerated at first glance.
surfer
Bill O'Neil recommends those books about trading:
http://www.investors.com/ibdstore/bookscds.asp?p=rl