Volatility, trade wars, rising rates—each of these factors would, by themselves, make a covered call strategy more attractive relative to traditional equity or fixed income portfolios. When all these factors combine, the effects are compounding.
The equity indices are back to record highs, and while smart to maintain exposure to the upside in a bullish market, we must also be mindful to protect the profits we have already made. Investors should ask themselves if they are properly positioned for the market to flatten or retrace.
Nick Griebenow is assistant portfolio manager for Shelton Capital Management’s separate account program utilizing covered call writing.