Covered Calls To Boost Income

Today, our guest on The Daily Guru is Craig Van Hulzen of Van Hulzen Asset Management. The covered calls do two things for the strategy: They generate additional income over a dividend yield of a commiserate index, and they also work to decrease the day-to-day price volatility of the fund, relative to just a long-only stock portfolio.

Our strategy is: It’s a bottom-up fundamental strategy, good rigid stock selection, but then when we select those stocks, we use the covered call as part of our exit strategy. So if we’re hopefully buying names that are undervalued, we are selling that call option where we think is the proper valuation for the company, and would be an exit strategy anyway. That additional income that we collect from selling that call also acts as downside protection during periods where the market is moving in a sideways pattern or in a downward pattern.

Source: Forbes

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