[DesertCat]

[ QUOTE ]

It all comes down to what you are trying to accomplish. Take something a bit more volatile for example. AAPL closed at 136.76 today and the Sept 140 calls closed at 4.16. If that gets called away in a couple of weeks you just made 5% in less than a month. If it doesn't you bought the stock 4 bucks cheaper than otherwise and you can sell some more against it next month.

[/ QUOTE ]

Skindog is selling covered calls that are 30% out of the money for 1-2% per month. AAPL OCT $175 (about 30% out of the money) sell for $1.15, about 0.5% per month. Can you imagine how volatile the stocks he's writing against are? Or is Skindog doing a bit of exaggerationing?

Earning 5% in a month is great, but not at the expense of being called out of your stock when it shoots way higher. In August AAPL bounced between $111 and $139. Imagine the second week of August when your Apple stock was $120 you sold some covered calls at $125 for $4. Apple closed at $127 the last day of options. The next day it was trading for $130 and a week later $139. But you got called out of your shares for $124.

There is no free lunch with options. The chance that your stock will trade higher than the call price is worth something, about what you sell it for. Worse is that if you want to hold the stock long term every time it gets called your long term capital gains clock gets reset, making it more likely you'll pay higher tax rates. Plus you have to pay transaction costs in an expensive, illiquid options market that only trades in nickels.