Financial media wants you to sell covered calls during a correction. They want you to boost income while the market tanks. They want you to feel productive while your portfolio bleeds.
Selling covered calls in volatile times is like opening an umbrella during a hurricane. You've done something. That something will not help.
The pitch goes like this: collect premium, reduce your cost basis, generate income when you need it most. What they skip: you cap your upside right before the inevitable snap-back rally that you waited six months for while eating ramen and refreshing your brokerage app like a lab rat pressing a cocaine lever.
Retail traders love this strategy because it has a name. It sounds professional. You can tell your brother-in-law about your covered calls and he'll nod like you've figured something out. You haven't figured anything out. You've just agreed to sell your shares at exactly the wrong price in exchange for beer money.
The volatile times part is my favorite. Volatility means higher premiums, they say. Correct. Volatility also means the stock you own could rip 40% in three days while you're locked into selling at a 5% gain. But hey, you collected $87 in premium. Frame it.
Then there's the cash-secured put crowd. Selling puts to get paid while waiting to buy the dip. Genius plan until the dip keeps dipping and you're assigned shares at a price that seemed like a bargain before the company announced they've been using Monopoly money for GAAP compliance.
Every options income strategy works great until it doesn't, at which point you're explaining to your spouse why you're obligated to buy 500 shares of a stock that's down 60% since you got cute with theta decay.
Options don't generate portfolio income in volatile times. They generate regret with extra steps and a 1099-B you'll need a CPA to decode.
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