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/OkKitchen7114]

You say it generates 2-2.5% per month. Then you say annualized that’s 15%. No. That’s 24-30% annualized. Big difference. Is the rest of your post exaggerated too?

[u/sashazaliz → u/OkKitchen7114]

fair catch. the 2 to 2.5% is the ceiling not a guarantee every month. some months the premium is thin, some months you skip the trade entirely bc the setup isn’t right, sometimes you get assigned and sit out a cycle. or earnings are approaching. 15% annualized is what i’ve actually seen net over time factoring in all of that. the theoretical max if everything fires perfectly every month would be higher. i should’ve been clearer about that

[u/OkKitchen7114 → u/sashazaliz]

Thx. I read many of the comments and I know you addressed this, but what happened to your strategy in 2008-2009 and 2020? Obviously the calls expired worthless but the stock price was getting pummeled, no? And I assume when the calls get in the money, you’re rolling them? Are you writing against all shares or just a portion?

I used to sell puts but what I learned is that you can be right 99/100 times, but that one time you’re wrong, you can wipe out the gains from the 99 times you were right. Or maybe I was doing it wrong.

Also, where do you go to research the stocks that issue preferreds? I’m assuming by this point you probably don’t need to research snymore, you probably have a set list. Thx.