Possibly. Under certain circumstances there are ways to abide by your employer restrictions and still participate in IPOM.
Generally, the gain or loss on the covered calls is treated as a short-term capital gain. In the event that stock is sold through a covered call, the premium received for the option is added to the sale proceeds of the stock.
Yes. However, there are several terms that must be met.
Yes. Selling covered call options is approved for most retirement accounts, including IRA accounts.
Yes. Through an overlay technique we are able to maintain the accounts current stock positions while executing IPOM on only the client’s selected stocks. (stock positions must meet minimum requirements)
Not always necessary. In many cases Watts Gwilliam & Company is able to perform the strategy without the client having to move shares from their current custodian.
Yes. However, doing this may require closing option positions at a loss. There is a chance that this loss could exceed the upfront income that was earned at the onset of the strategy.
Yes. In fact, many clients use the IPOM income to hedge the cost of margin interest.
The IPOM uses listed options to execute its strategy. Listed options are American style options, which means that it is possible for shares to be exercised prior to the maturity of the option. This rarely happens. If the client desires to retain their shares and is exercised and called to deliver stock, Watts Gwilliam & Co. will buy stock in the open marketplace to deliver against the exercise of the option. This is a simultaneous transaction that is normally cash flow neutral.
In periods where the underlying stock is flat or down the IPOM will outperform a long only position. Even if the stock appreciates, the IPOM can match or sometimes exceed the returns of simply holding onto the stock. Periods of rapid appreciation will likely cause the IPOM to under-perform a long only strategy; however both methods would result in a positive outcome.