I fell victim to that emotion when I was up 20%. I got greedy. That can turn a winner into a loser in the blink of an eye. I kick myself a little less for not taking profit, however, because I stayed true to my options strategy, even though I knew it might result in not only having my shares called away, but at less than market price.
I have written Pandora covered calls a total of six times in recent months. That covered call writing generated about $832 worth of income. For the record, I bought calls back for a gain three times, had them expire worthless twice and was assigned on the transaction this past weekend.
Factor that $832 into the proceeds from my sale of Pandora shares at $9.00 and, not including transaction costs, I made money on the position. Thanks to aggressive covered call writing, my would-be double-digit loss is actually a 1.9% gain. Throw commissions in the mix and I'm slightly above breakeven.
It doesn't always work out quite so textbook, but with some discipline that includes sticking to a covered call options strategy, you set yourself up for less pain -- or not much pain at all -- when a speculative play hits speed bumps.At the time of publication, the author was long P and YHOO. Follow @RoccoPendola This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts