Not all stocks are suitable or good enough for writing covered call options against all the time.
In spite of my answer to Kevin above, I am not a big fan of mutual funds. Using the ETFs as a mechanism for selling covered calls is ok, but I am not a huge fan of ETFs, either. This is simply because there are now more mutual funds and ETFs on the market than there are individual stocks.
Clients ask me why I don't like mutual funds. The answer is simply that I see no reason to pay someone else to buy stocks for me, and worse, take a piece of the pie, whether the stocks lose money or make money.
I have the same response for every person who tells me they don't know anything about stocks: Do you eat Cheerios? GIS. Do you put ketchup on your hamburger? HNZ. Do you wear a nylon windbreaker in the fall? DD. Got Post-It notes on your desk? MMM. Put a band-aid on your cuts? JNJ.
If any of you have ever read Peter Lynch's books you will know that he says one of the best investments he ever made for the Fidelity Magellan fund was when he saw a plastic egg, with pantyhose in it, when his wife came home from grocery shopping. Pay attention. Next time you go to the grocery store, you will see KO, PEP, GIS, CAG, HNZ, K, PG, CLX and YUM. Drive down Main Street in your town you will probably see MCD, C, BAC, JPM, YUM (again). If you are using your cell phone (hopefully hands free) you should hear T, or VZ. Drive by a farm you should think MON, POT, DE. If you are driving, you are hopefully not thinking BUD, but when you get home, and turn on the game, go ahead, have a cold one. If you read about a car accident think ALL, AIG, BRK, HIG.
See? Stock picking is NOT hard. ANYBODY can do it. Every consumer can be a stock picker if they simply pay attention to the company that makes what they wear, drive, eat, live in or live under, or otherwise consume. They just don't realize what they know. The BCI have taken it one step farther, and learned to screen stocks to find the best of the best. They have also learned how to put that knowledge to good use making a few extra dollars on the stock movement by selling covered calls on those stocks.
Before someone jumps on me, yes I do own some mutual funds, but they are foreign stock funds and bond funds, for obvious reasons.
BTW, many of the stocks mentioned above are optionable and pay wonderful dividends (3-7%). If you were really paying attention to this weeks blog post above, I just gave you a shopping list for "portfolio overwriting". Go check them out.
Happy trading everyone.
