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Topics discussed in this episode include covered call strategies, the Federal Reserve's potential actions, Warren Buffett's latest moves, and the debate around returning pandas to China. The hosts also touch upon investing strategies, dividend growth, and the connection between earnings performance and stock market prospects.
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Quick takeaways
- Kevin Simpson discusses his covered call writing strategy on large cap stocks, emphasizing the importance of dividends for tax purposes and clients' preference for rising income.
- Simpson shares his view on the market outlook, predicting potential rate cuts but considering the timing to be premature, highlighting the impact of interest rate reductions on equities and cautioning about the effect of economic contraction on earnings and multiples.
Deep dives
Opportunistic Covered Call Writing on Large Caps
Kevin Simpson, founder and CIO of Capital Wealth Planning, discusses his covered call writing strategy on large cap stocks. He focuses on 25 to 30 high-quality stocks, primarily from the S&P 100, with each holding being approximately 4% of the portfolio. Simpson is opportunistic in his covered call writing, looking for short-term options with out-of-the-money strikes. He aims to generate 2% to 4% annualized option premiums and trims positions that exceed 7% to 8%. Simpson emphasizes the importance of dividends in his strategy, blending them with the option premiums for tax purposes. He also mentions that more than half of his business comes from non-qualified accounts, displaying clients' preference for rising income. Additionally, Simpson discusses his view on Warren Buffett, expressing admiration for Buffett's value investing philosophy rooted in Benjamin Graham's teachings.
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