This is not investment advice and is intended for entertainment purposes only

Covered Calls on Semiconductor Stocks

In a perfect world, I would only sell covered calls in my Roth IRA…

But alas, the world is not perfect and we have to pay taxes on the premiums we collect.

Writing Calls on long-term allocations

Writing covered calls on long-term holdings can be a valuable strategy for income generation, especially in sideways or slightly bullish markets.

I often get the concern that it ultimately is a losing strategy thinking in long-term time horizons:

If you are bullish on the semiconductor sector, should you be taking a position that profits when there is little/no growth?

I’m bullish on the semiconductor sector. In the long term, I hope to have a 40% allocation to semiconductor stocks. I also write very conservative calls on top of some of my semiconductor stocks.

This was an advantageous strategy in 2022 when the market was correcting. Now, I’m being more conservative with my premiums as the market has become more volatile and has been on an uptrend.

Let’s break down the advantages and disadvantages of Covered Calls in your long-term strategies:

Advantages:

1. Generating Income: Premiums serve as an additional stream of income.

2. Downside Protection: The premium received can provide a small cushion against minor declines in the stock's price.

3. Flexibility: Investors can choose the strike price and expiration date based on their outlook for the stock.

4. It’s Fun: (Or At least I think it is.)

Disadvantages:

1. Capped Potential Gains: If the stock's price rises significantly above the strike price before expiration, you can get assigned. Then you have the loss of potential gains beyond the strike price.

2. Limited Protection: The premium received provides only limited downside protection. In the event of a significant stock price decline, the loss is potentially much larger than the premium received.

3. Tax Implications: If you are forced to sell assigned, it might result in a capital gains tax if the stock was held in a taxable account and had appreciated.

What am I reading?

The Siberia Job

Josh Haven's "The Siberia Job" takes readers on an adrenaline-fueled ride through the harsh, remote expanses of Russia.

Following the demise of the Soviet Union, two unlikely partners came together to seize the opportunity by taking a major stake in a previously Russian-owned oil giant through the acquisition of vouchers being distributed to the public. The Texas businessman, John Mill, and Czech Petr Kovac find value where no one else is looking and take on an unruly adventure to accumulate a large stake in what was soon to be a massive company on the Russian public exchanges.

Their acquisition plan takes a wild turn when the corruptly-run company moves the auctions of the vouchers to remote locations where the team is required to trek to the edge of the world where their lives are on the line and their instincts are put to the test.

Final Thoughts:

I read this book in two days because I simply could not put it down. It’s gripping, and heartbreaking. An ode to capitalism in an age of uncertainty post-Soviet Union downfall. It explores the aftermath of an economy having to find its footing after moving on from being centrally planned.

It made me question the extent to which I would go to achieve something extraordinary. I found myself pondering the conviction I feel as I make my trades and strategize financially. It is feeble compared to the gumption these two had to show to pull something like that.

As inspiring as the story is, it is also deeply heartbreaking. I found two different pages of the book to be left with a tear stain after becoming so emotionally invested in the group’s endeavors. There is so much injustice it’s hard to bear.

At the end of the day, it made me thankful for the freedom we have to invest and participate in our free market every day. I don’t appreciate the simple freedoms I get to live with every day such as the freedom to participate in the global economy.

When The Siberia Job agreed to be a sponsor of Stonk Enjoyer, I was excited and then deeply touched. It truly was the adventure of a lifetime and I love getting to share in the telling of this epic story. Finally, I want to honor those who lost their lives unjustly and take a moment to acknowledge the fallen.

My highest praises to “The Siberia Job.”

Stonk Enjoyer in the Wild

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