Simpler Covered Calls For A Recession

CATEGORY: Investing

Yesterday I sold 700 shares of STOR which yields about 5% and has been lingering in my portfolio due to it’s recently having been acquired. Pondering where to put this cash as we stare into a possible recession in 2023 I have been thinking about JEPI which could be a limited risk way to earn more than 5%. JEPI yields about 11% and pays monthly. So today, Jan 5, 2022, I added some JEPI.

JEPI holds about 100 stocks and sells covered calls on them in order to derive income. How well do they perform in a recession compared to any other investment? Very good question. We shall see how that works out. But my view is in order to be diversified I need a variety of strategies that counter balance each other. If we get a 20% to 30% market drop it will be time to rotate to SPY. The alternative is to hold cash. At 10% inflation cash loses because of 100% guarantee of loss ( equals 100% risk factor) and JEPI wins.

Of course I could overweight on energy or tobacco or beer or BDC’s (business development companies) – but that would not represent diversification. And that too increases risk

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