For a long-term buy and hold position, what's the best way to sell CC in a bear market to generate monthly income? You probably won't get paid much unless you want to pick a strike that is below your cost basis and risk getting a realized loss on the position if assigned. Thanks!
you should send PM to "rallymode". He developed a solid methodology that generates monthly income in any type of markets.
You really don't want to be selling CC's in a bear market. If you have stock that you don't want to sell for tax reasons then sure a ITM call is a small hedge to the devaluation of the stock...however "small" is the operative word. People who held on to the Financials and sold covered calls are down at least 25%-30% anyway. You are better off selling the stock...NOW or 1st part of the year (to defer the tax) then watching until the stock falls to a value that is a screaming bargain. THEN selling a put on it at another 5-10% below that value or selling a 3-6 month (out) put ATM. Better yet a monthly put spread (or IC) to at least limit your loss and generate the monthly income. The cash from the sale of the stock is then collecting interest while your waiting out the bear. Covered calls do fine in a flat to uptrending market...they are the worst choice in a bear market.
No I mean call. You wanted to know HOW to sell a CC in a bear market. IF your gonna SELL a call in a bear market it may as well be in the money...since you are predicting the stock will be going down. IF you sell a put you are predicting the stock is going up. edit... AND I am NOT BUYING a CALL I'm SELLING ( remember your selling CC's)
If you already own the stock and don't want to sell, and you think we are going into a bear market (duh), you can always collar it.
In a bear market or a flat market, I love selling covered puts. (Short the stock and short an ATM Put). But, be careful when shorting stocks...stay away from dividend paying stocks because if you are short the stock on the day it goes ex-dividend, you have to pay the dividend.