With cash equivalents paying next to nothing and popular bond funds yielding around 2%, advisors lack an easy path to meaningful investment income. As a result, some are selling covered calls an options strategy that lets clients hold a stock for potential profit while making income-producing side bets on its intermediate-term movement.
We use covered calls as an income solution for our conservative investors, says Herstle Jones, who heads a planning firm in Medford, Ore. Trying to generate 5% to 6% per year in income can be difficult for such clients in todays environment, but we can do this with call proceeds and dividends.
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