I bet you never wrote a portfolio of covered calls and puts for high premiums. The ones that rip will kill you ...
Metoox, you are so right! Another thing is that in time you will be left with a portfolio of very worthless stocks that went south. I have left 4 such stocks in my account just to remind myself to leave this well alone. (CPN, SEI, PKD, PRTN) At a recent seminar when they were talking about protecting the stocks in your portfolio I asked How do you collar a $1.00 stock.
I have had that problem; earn 15% in premium, stock tanks 20%, buy it back and roll down, earn 5% in premium, stock tanks 10%, and on, and on ...
Perhaps understanding FDA approval...? Looks like the Hospitals are a mine field now as well... nitro
Metoox, I also have done the rolling down thing pretty much to no avail. However doing the same with calender spreads has worked quite well. The two stategies CCs and cal-sprds are some similar but when the far out month falls it can't go from $70 to $5 so the drop is much easier to make up. As for the drugs I was so burned that I finally decided puts were the only way and earlier this year they were. IMCL, BAX, SEPR to name a few.
The only way to do it is put a collar on it; but it reduces your return by two thirds or so. But it works ...
I don't know about anyone else but what has hurt me the most in calenders is having them go ITM and then not being able to roll the short side. I am almost, I say almost, convinced to use put calenders in a rising market and stock and call calenders in a falling one. It seems much better to use the short to make up the decline in the long than vice versa. You can also turn it into a diagonal calender to help if you are careful. I had PPD fall from $29 to $18 or so earlier this year and still came out with a fair profit with the diagonal approach.LOL