This is a big picture question based on the recent article on optionson5i Research and also based on Peter's expertise on Options trading. After all your i2i fund is based on this strategy, if I am not mistaken, right?
How does one screen for stocks , selling cash secured puts and Covered calls? Any particular favorite screeners that we can use who don't have fancy Bloomberg terminals? Your excellent article in 2015 talked about Covered calls (where is the promised follow up article?! :)) YouTube is filled with clips that promote either courses or their black box products. I want to develop a methodology that I can use in a systematic manner.
IF I want to protect myself for the expected and very possible downturn in the markets, how does one employ this technique?
Finally what are your stocks selection for such an approach at this time? ( Both for Selling cash secured puts and Covered call)
Feel free to deduct as many credits as you deem fit.
Many thanks.
We can't comment on the fund in this forum; for options we like to screen for cash position, growth, volatility, momentum, sales growth, earnings growth, ROE, cash flow, margins and other factors. Most broker data services can screen for these except for perhaps momentum which can be harder to screen for. Generally for covered calls we want highly volatile stocks but those that are still strong fundamentally, so that if we need to own them a long time we are comfortable. We prefer not to have big dividends as these often get called away for the dividend. We prefer $10B+ companies simply for better liquidity. The key is to do enough sectors so there is some diversification, and to focus on the income. In other words, we don't stress if something is called away: that is the whole game plan. If one sells out of the money calls and they are assinged, returns are very nice. We do be careful on stocks that decline, like with any losing position. At some point, it is better to take a loss than keep a declining stock that is only partially offset by call option income. We would not suggest using PUTS for protection. Going long puts can be very expensive, and of course options expire. One can instead sell in the money calls for some protection, or short an index that is representative of one's holdings. We will see what we can do about a follow up piece.