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Linn Energy, LLC Message Board

rjl500k 2 posts  |  Last Activity: Jan 27, 2016 4:34 PM Member since: Apr 5, 2006
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  • Reply to

    etw

    by minonov1234 Jan 23, 2016 10:00 PM
    rjl500k rjl500k Jan 27, 2016 4:34 PM Flag

    I have similar concerns. I'm going to hold off but will buy this one when the S&P drops to around 1550 or so.
    I have trouble with ROC issues too but found a couple websites that explain this pretty good and options etc. do generate ROC: Unfortunately they keep getting rejected on this blog. Also I see 3 tech stocks (apple is their largest position) which from my readings are heading down with other tech stocks. I'll hold off awhile on that score to see what happens. I like global nature of the CEF too.
    Here's a section of the best article: While many investors use this strategy in their portfolios, others invest in closed-end funds that use this strategy and distribute the proceeds to shareholders. This is a great strategy in specific type of markets, such as sideway movements in the general stock markets. The biggest myth to this strategy is that covered call writing does not work and the CEFs are only returning the investors' capital disguised as distributions. This is incorrect, as return of capital by CEFs is based on accounting definitions when using option strategies like covered call trades.

    Most of the CEFs that use an option strategy will use return of capital (ROC) for a portion of its distributions. Many investors see the ROC and throw these CEFs back into the market. If these CEFs are returning capital, shouldn’t this be reflected in the share price or NAV? The answer is no to CEFs utilizing an option strategy. These CEFs may write a call option for 3 to 6 months, or even 1 year of time or more. The premiums received for the call writes is not considered income until the position has been completed or ended. Therefore, the CEF has the cash premiums but it can’t be considered income because the option trade has not ended. When this cash is used for distributions, it will be classified as return of capital instead of income. In reality, this distribution was not a result of return

  • Reply to

    Now 3.5 years of unchanged monthly......

    by keltus1952 Dec 22, 2015 9:44 AM
    rjl500k rjl500k Jan 27, 2016 12:30 AM Flag

    Doesn't the continual drop concern you? Doesn't move like other Eaton CEF's

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