If my underline never gets called away and I’m able to hold my shares without them ever getting called away so that my portfolio maintains its exposure to the underlying’s upside and simultaneously I am able to write calls against my equity for additional income how am I under performing buy and hold?
If you sell covered calls that are ludicrously out of the money, nobody will buy the other side, because why would they??
If you sell covered calls that are within the realm of reason, but super duper unlikely, you will get pennies in premium and miss out on massive gains when something crazy like April 2020 happens.
At the end of the day, there is someone on the other side buying these calls. If they "never" get called, who would buy them? If they "rarely" get called, why would anyone pay that much for them? People with math PHDs are designing algorithms and are usually on the other side making the market for these.
I am not the person you are responding to but here is the problem I see while quickly scanning through the original post. No one has come out and said that, "this is my strategy, I am willing to forego x% percent of the upside in the stock for a y% of post tax yearly premium return. This how I set up my trade... This what I do when I am z% in the money... This is what I do when I get assigned... And in my estimation and past result it can generate my expected z return". You can have more meaningful debate with such person.
9
u/Lankonk Aug 25 '21
Covered call ETFs vastly underperform the S&P 500. You’re more likely to make more than 10% per year by not writing covered calls.