Hi Mark,
My wife Susan is sitting next  to me as I write this and she thinks I am an impatient fool.

Honesty requires that I admit I am sipping Bubbly as I write, so/but here is my foolish question: she holds 10,000 shares of General Electric, acquired over the past year starting at under $8.00. Her weighted basis is probably $11.00. The stock is at $18.50.

The securities are held across several SEP, IRA and Roth accounts between Schwab, Scottrade and a local, regional broker (Umpqua Investments).

Might there be some tangible benefit to her writing covered call options on a portion (say half) of her GE holdings?   I the fool do not know whether she can even do it out of her retirement accounts, but "me thinks there's a way" to improve her yield and lock in the profits she now enjoys on paper.

Am I really, truly, a fool?

Thanks,
Dave


Dave,

If by impatient she believes you should sit back and wait years for this investment to fund your retirement years, then I am on your side.  The future is unknowable, and I'm a believe in hedging your bets.  But this is a personal decision for both of you.

That said, you are no fool.  Selling up to 50 calls gives you the chance to do what you described

If you truly want to hold this stock, then writing covered calls is not perfect.  There is a chance you will sell some shares.  But to me, that's fine.  The price would be higher - plus you get to keep the option premium.  If that suits your plans, you can sell some Jan or Sep calls with a strike of 20 or 21.

To protect your investment profits, you would be forced to sell calls with a lower strike price.  That generates income and affords some protection in a decline.  Not a lot of protection, but some.  You may want to sell a small number of calls with a strike of 18 or 19.

One problem with GE is that the option prices are not that high.  However, if this plan appeals, you should be able to find some options to write.  You are looking for a total of 50, probably distributed among 2 or 3 different options.

Best regards,
Mark