Investools and Sink or Swim seminar

[traderich]

I went to an Investools seminar this afternoon.

I never really got into call and put options but had a basic idea of the concept.

I found it interesting to hear the commentator mentioned using
covered calls.

He asked everyone how they would making 2,3, 5 or more % each month on your stock without having to sell it but merely renting it out.

He said the way the covered call works is say you buy a stock for $18.75 share and then buy the covered call for whatever your commission is (say $7). The covered call gives someone the option to buy your shares (he gave example of 300 shares) for some price higher than what you bought it at (say 19.10/share).

He said that if the stock stays below 19.10 then you would get $105 (for this example) and still own your stock.

He said this was a great way to make money on stocks regardless of what it does price wize.

Interesting concept.


Anyone have any ideas on this?

I know what is going through my mind but curious what others think? Like I said, I don;t trade options so I was wondering what others thought about this.

 

[zxcv1fu]

save your time & money, don't buy anything!

 

[traderich]

listen moron,

save your stupid comments for another blog.

 

[NY0BScalper]

To the OP,
familiarize yourself with the difference between a covered call and a short put.

 

[iloveoptions]

Quote from traderich:



He said this was a great way to make money on stocks regardless of what it does price wize.

Interesting concept.

Really? Are you sure they didn't say "TradeWize" rather than price wize. LoL. Seriously though, the money that you're paid by selling covered calls or "renting your stock" will cover you only by the premium you collect, which means that if the stock falls below that level (example: stock is at 20 and you receive 2.00), say below 18, you start losing money. In this current enviroment, many stocks may end up going way below intrinsic value till the economy starts showing signs of real life. I advise you against it unless you feel real lucky, or know what you're doing. Best of luck.

 

[1flyfisher]

I wrote my first covered call in 1982 on Farah manufacturing. A clothes co.

 

[HolyGrail]

Covered calls limit your upside potential and do not reduce your downside risk.. Some people use this strategy when the market looks like it will have little movement. If you can be CERTAIN the stock will not drop lower than the premium you received for the call then it's a great strategy. Unfortunately, you or anyone else won't be able to do this with any regularity. The other poster was correct. Save your money. They are teaching you unprofitable strategies that sound good to the novice.

 

[suedeuno]

If I was interested in generating income then something like a vertical would have less risk. You're not hedged writing a call.

 

[traderich]

I agree with everyone who correctly spells out what the covered call is all about.

My thought when he mentioned his example of how you just keep writing covered calls each month and make your $105/month with no risk was bullschitt!

I wanted to ask him what you do if you buy the stock this month at 18.75 and buy the covered call and next month the stock is at $15/share and you write another covered call and the stock goes up to $15.50. You get your $105 for 2 months but lose 2.25/share which is exactly what you mention about how the only way you make money is if the stock does not drop below the call revenue.


The other thing I noticed in the seminar was how he went through about (7) different "phases" as he called them for analyzing stocks. These phases things like insider trading strong, timing, prepare to invest, money management, portfolio management, etc. etc.

He said there were 13 key stats for each stock they monitored included cash flow growth etc. etc. He said that you needed at least 5 positive stats to consider a stock.

UltimatAely it came down to that he was saying they had a website that would give you the information you would need to make educated, prudent, PROFITable trades.

The one thing he didn't show was any track record or correlation between his GREEN indicators and the results after this.

I would have liked to seen something that documented how their in-depth analysis had shown "79% of stocks having at least 6 positive indicators showed profit"

I am making up the 79% figure, but I think you know where I am going with this.

Funny how I took something extremely simple and can show that 50% of the time I lose money on any given day or stock and yet over the course of 1 year have gained 70%.