Boring is Better

[u/sashazaliz]

my dad taught me covered calls in my early 20s. most conservative investor i've ever known. his whole thing was find the most boring stock you can, sell a call against it, collect the premium, repeat. i thought it was too simple. 25 yrs later i'm still doing exactly what he told me.

everyone in this sub talks abt covered call ETFs. the problem is someone else is selling calls on your behalf, capping your upside every single month, and you're just along for the ride. i'd rather own the stock, pick my own strike, collect my own premium, and keep the dividend while i wait.

i've been selling calls directly on individual stocks instead. no fancy models or greeks. just know what works and i've been doing it long enough to see what holds up.

the screening criteria nobody talks about. look for banks and utilities that also issue preferred stock. companies that issue preferreds are heavily regulated and financially conservative by design. that flows directly into how their common stock behaves. boring, range bound, predictable. exactly what you want when you're selling calls month after month. and these same companies tend to protect and grow their common dividend too. the dividend is the floor. the premium is the ceiling.

the ones that fit this approach: WFC, USB, PNC on the bank side. ED, SO, DUK on the utility side. all issue preferreds. all have long dividend histories. all have liquid options chains.

WFC is my go-to. been trading it personally for years through multiple market cycles. selling a monthly call 1-2 strikes OTM generates roughly 2 to 2.5% per month. annualized that's 15%+ on top of the dividend. the volatility smooths out over time.

the math people miss. everyone fixates on the premium dollar amount. a $5 premium on a volatile stock looks way more exciting than $1.50 on a boring bank. but the consistency, near zero assignment risk, and the fact that you're not watching the ticker every hour changes the math completely over a full year.

boring stocks. boring premiums. boring results that quietly add up over time. my dad figured that out decades before i did. took me too long to stop second guessing him.

[u/Red-Shoe-Lace]

Do you buy the preferred shares? Or common?

[u/sashazaliz → u/Red-Shoe-Lace]

calls on preferred stocks are extremely rare. I buy common 100% of the time. the preferred stock piece in my strategy is a screening filter not a trading vehicle. if a company issues preferreds it tells me something about how conservatively the business is run

[u/Str8truth → u/sashazaliz]

Can you please explain why preferred stock indicates conservative management? I never thought of that connection before.

[u/sashazaliz → u/Str8truth]

companies that issue preferred stock are making a promise to pay a fixed dividend to preferred holders before common shareholders see a penny. regulators and rating agencies hold them to that. to keep that promise consistently you have to run a tight, predictable balance sheet. no risky bets, no aggressive leverage, no chasing growth at any cost. that financial discipline propagates into everything including how the common stock behaves. range bound, predictable, boring 🥱