Dear Smart Profits Report Reader,
In last Friday’s weekly Inside Mt. Vernon Research column that I send out to VIP members of Mt. Vernon Research, I noted that U.S. stocks were likely to re-test their lows.
This will happen as the “Obama Bounce” fades and we get back into the swings of volatility.
One strategy I recommended to soften the blow was to sell calls against your existing stock positions. If you’ve employed this strategy recently, you’ve likely mitigated some of the fall. This comes as I read all kinds of articles recently that extol the virtues of selling covered calls.
It’s about time!
The Skinny On One Of The Best Investment Strategies In The Market Today
In a nutshell, when you engage in a covered call trade, you’re selling call options against shares that you already own.
When you sell a call - and you can do this in any type of account, even your retirement accounts - you immediately receive cash into your trading account. In return for this cash, you’re obligated to sell your shares at a certain price. This reduces your cost.
This works best when the market is rangebound - but that’s only the half of it…
What most people don’t understand is that you can use the same strategy with a major modification, which actually mitigates a ton of risk while still making money. It’s the exact strategy that I use and recommend regularly to my Strategic Income readers - and you can read more about that here:
Two More Solid Strategies For A Wobbly Market
I also recently recommended the advantages of taking positions in Municipal bond ETFs. These have rallied nicely since our call - up by double-digits and paying sweet tax-free dividends, too.
Given the rise, they’re not in a good buying range, but anything is possible in this market, so keep an eye out for an opportunity to get back in.
Two words of advice:
- Only buy “AAA” rated funds.
- Buy those that are insured.
