Equity-Income Program

The program utilizes a common strategy known as covered-call writing, which employs ordinary stock options.  While stock options are used by some individuals to speculate (and often lose money), investors use options to reduce risk.  We're part of the latter group. Our approach is designed to generate capital gains and income.

The success of the strategy, we believe, relies on selecting stocks of only highest-quality companies when they're priced inexpensively.  To identify the best firms, we typically require:

  • A history of raising dividends
  • Earnings that are "recession resistant"
  • Sufficient earnings for dividends to be paid easily

Few companies meet our criteria.  Those that do are often household names such as Johnson & Johnson, Wal-Mart and Verizon.

We buy the stock of these remarkable companies, and we sell—for a "premium"—a call option allowing others to buy our stock at a set price within a set period of time.  To fully profit, all we generally need is the stock to be at or above the current price in approximately one-to-two years.  Thus, the Equity-Income Program targets a stable, attractive return.  What's more, we earn dividends along the way.

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