RE: How I make money on a losing stock

I do this all the time on every stock that I can write options on. Rather than go out far in time I go one month at a time. That makes choosing the strike price a whole lot easier.

Over time I have created some benchmarks. If the stock I am holding is in profit I want a strike 5% above the current price and I take whatever premium I can get. If the holding is not profitable, I look for a strike 10% higher. If the market wants to move 10% in a month, let it go. That becomes my stop loss strategy. The second benchmark is I am looking for 1% premium a month. This gets deployed on more volatile stocks where options premiums are higher - examples in my portfolios are cannabis, lithium, solar power - stuff like that.

As for trade management, I very seldom consider buying a call back. There is always another stock to replace one that got called away. Sometimes what I do on a stock I want to hold and price goes past the sold strike, I sell a put option below the sold strike. If the market pulls back I get a chance to buy in lower. If not I just doubled my income.

Two factors to consider. Choose the broker well - in my personal accounts my broker will allow me to sell a call option without the stock. I just have to hold enough margin. That means I can sell stock even if there is a sold call in place. In my pension portfolio, I cannot do that - it is as you describe. 2nd - trading costs are a factor - choose a broker that is competitive. Even better choose one that will share commissions if you as the investor are making the market. That happens a lot for me - I am trading a lot of options. Nice to get paid for trades. I do write covered calls in Europe and Australia and UK - trading costs are not nice.

How does that all add up. If you can earn 1% a month writing covered calls and a few naked puts you can gear up returns by 15% annually for 2 to 3 hours work once a month.