How To Find Best Stocks to Write Covered Calls / Example with T, O & PBCT

Updated: 29 June, 2021 seen 275

In this short video, I'm answering a blog reader's question - how to find the best stocks to write covered calls on. 

Transcript

Hello everyone my name is Reinis Fischer and you are watching my YouTube channel, where I'm talking about stock investing, options trading, and finance in general.

Today I have some great news I have got one new subscriber to my YouTube channel -  Carlos T if you're watching big high five to you!  Thanks for subscribing! I hope you enjoy the content!

Alright, so today's topic I want to talk about is -   how to find the best stock to write covered calls on

A few weeks ago a reader asked me a question -  how to find the best stock to write covered calls?

Before answering this question let me give you a brief background about my options trading career -  in short, I have been actively trading options for about two years.

My first trades actually were puts, not calls, I was selling put options - collecting premium and waiting for a contract to expire worthlessly just to start over.  Rinse and repeat!

Just later I started to learn about adjustments and other options trading techniques.

I decided to start safely with the so-called dividend aristocrat stocks,  and one such is T or AT&T stock

T stock has one of the highest dividend yields among dividend aristocrat stocks, paying about seven percent yield annually.

In a good year combining dividends with covered calls you could yield up to 20 percent of  income from T  annually,  I mean like dividend is some seven percent and you're writing covered calls you could get  10 - 15 %

Remember there's always risk involved when selling covered calls, and the main risk is the stock could fail significantly, say you buy it paying 30 bucks and after a week it's trading at 15 and you're losing, you're losing big.

Anyhow I started selling premiums by writing put options on T stock, it felt safe and the worst that could happen - I could get assigned a hundred shares of T. But if so I would start selling covered calls, the so-called wheel strategy game, and yeah meanwhile I would collect that hefty dividend 

New terminology, like wheel strategy, triple income and so on 

So this is what I do still today - I look for relatively safe stocks, preferably from the dividend aristocrat  list, depending on the situation either I start by writing put options  or I just buy and write covered calls on it 

My favorite top three dividend aristocrat stocks I write covered calls on I would say one of them is Realty Income (O)  stock,  one is AT&T,   and one is PBCT, People's United Bank 

The T stock is yielding about seven percent annually in dividend payments. Realty Income is yielding about four percent per year and People's United Bank -  six or seven percent and combined 

Here you go, if you're looking for some of the best stocks to write covered calls on  I suggest starting with stocks from the dividend aristocrat list or the Dow Jones list top 30.

Thanks for watching and don't forget to subscribe if you enjoyed this video. I really appreciate your likes and comments too.