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Watts Gwilliam & Co. LLC
2730 S. Val Vista Dr.
Suite 124
Gilbert, AZ 85295

Phone:  480-889-8998 
Facsimile:  480-889-8999 
Toll Free:  888-324-8998

 

Frequently Asked Questions

Q. In which market environments will this strategy thrive?
A: In periods where the underlying stock is flat or down the IPOM will outperform a long only position. Even if the stock appreciates, the IPOM can match or sometimes exceed the returns of simply holding onto the stock. Periods of rapid appreciation will likely cause the IPOM to under-perform a long only strategy; however both methods would result in a positive outcome.

Q: Is it possible to prevent low basis stock from being called away?
A: The IPOM uses listed options to execute its strategy. Listed options are American style options, which means that it is possible for shares to be exercised prior to the maturity of the option. This rarely happens. If the client desires to retain their shares and is exercised and called to deliver stock, Watts Gwilliam & Co. will buy stock in the open marketplace to deliver against the exercise of the option. This is a simultaneous transaction that is normally cash flow neutral.

Q: I currently have a margin balance against my shares. Are they still eligible for the program?
A: Yes. In fact, many clients use the IPOM income to hedge the cost of margin interest.

Q: Can I terminate the strategy at any time?
A: Yes. However, doing this may require closing option positions at a loss. There is a chance that this loss could exceed the upfront income that was earned at the onset of the strategy.

Q: Is it necessary for me to transfer my account in order to participate?
A: Not always necessary. In many cases Watts Gwilliam & Company is able to perform the strategy without the client having to move shares from their current custodian.

Q: Am I able to use IPOM on only selected positions in my account?
A: Yes. Through an overlay technique we are able to maintain the accounts current stock positions while executing IPOM on only the client’s selected stocks. (stock positions must meet minimum requirements)

Q: Is this strategy available in retirement accounts?
A: Yes. Selling covered call options is approved for most retirement accounts, including IRA accounts.

Q: Can the strategy be used on my unexercised employee stock options?
A: Yes. However, there are several terms that must be met.

Q: What are the tax implications of the Income Producing Options Model (IPOM)?
A: Generally, the gain or loss on the covered calls is treated as a short-term capital gain. In the event that stock is sold through a covered call, the premium received for the option is added to the sale proceeds of the stock.

Q: My employer restricts me from doing any option trading on our company stock. Can I still participate?
A: Possibly. Under certain circumstances there are ways to abide by your employer restrictions and still participate in IPOM.

Contact us to learn more.

Watts Gwilliam & Co., LLC (“WGC”) is an SEC registered investment advisor located in Gilbert, AZ. WGC and its representatives are in compliance with the current registration requirements imposed upon registered investment advisors by those states in which WGC maintains clients. WGC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. WGC’s website is limited to the dissemination of general information pertaining to its investment advisory services. Accordingly, the publication of WGC’s website on the Internet should not be construed by any consumer and/or prospective client as WGC’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Furthermore, the information resulting from the use of tools or information on this website should not be construed, in any manner whatsoever, as the receipt of, or a substitute of for, personalized individual advice from WGC. Any subsequent, direct communication by WGC with a prospective client shall be conducted by a representative that is either registered, or qualifies for, an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of WGC, please contact the state securities law administrators for those states in which WGC is registered. A copy of WGC’s current written disclosure statement discussing WGC’s business operations, services and fees is available from WGC upon written request. WGC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness or relevance of any information prepared by any unaffiliated third party, whether linked to WGC’s website or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.