The one drawback with the strategy we recommend (selling covered calls and selling naked puts) on sound companies is that one can obviously miss a lot of upside. For example, Marathon Oil Corporation (MRO) has rallied from just over $4 a share to currently be trading at $7.17 in 6 weeks. If one back in October for example had sold November covered calls at say something like the $4.50 or $5 strike price, then one would have missed all that upside shares have tacked on over the past few weeks.
There are a few ways to combat this problem which is not getting enough upside on your investments. One is to buy a little more than 100 shares per contract. By buying 10 to 15% more shares, you are giving yourself the possibility to make gains on the extra 10 to 15% which you can hold for the long term. As we outlined in yesterday´s update, we believe the energy sector has excellent possibilities of going on a bull run over the next 3+ years which is why we will be adding more energy stocks in time to our portfolio.
On another note, Inseego (INSG) has been on the tear recently and has come up against significant overhead resistance. A triple top-reversal could definitely be on the cards here. Who though has the nerve to short this firm aggressively now with the clear prospect of stocks entering a runaway move (bubble) ?