Current markets - How and where to Invest

 Current markets - How and where to Invest

In the current markets scenario, which I would define as choppy and uncertain, one investing style that works well for me are selling covered calls. This helps your portfolio to grow even though the overall stock market sentiment is negative to neutral. This way you can stay invested in the market, while riding out the choppiness.

What is selling a covered call:

I will not delve too much into this topic as there are several articles that will do a much better job of explaining this. At a very fundamental level it's selling calls for shares that you own. I usually sell calls one month out to keep my risk manageable and more predictable. Mostly selling 1 call would require you to own a 100 shares. It's also important to pick stocks that are fundamentally strong and mostly stable, but are just not trending positive due to market sentiment. Volatile stocks like Tesla are not necessarily good candidates for this.

e.g. here you can see the performance profile of selling 1 covered call expiring on March 18th 2022 with a profit probability of 80% as well as a max return probability percentage of 76% with a 10% swing. Since this is a covered call, the downside risk associated with this is the cap on your profitability of the underlying.

Love to answer any questions or any feedback you may have.

I am a individual investor and not a financial advisor. All opinions here are my own and have risks associated with it. Please consult your financial advisor before making any investment decisions.