XA's DiBernardo on why worried investors should consider covered calls now

Ray DiBernardo, Portfolio Manager for the XAI Madison Equity Premium Income fund, says he's concerned about the market's valuation levels — noting that it "has been expensive for quite some time" — and while he is not expecting "dark clouds and a horrible environment," there's more downside risk, which could lead to market compression that puts covered-call strategies back into the spotlight as a defensive play. DiBernardo, an analyst at Madison Investments, says the proliferation of options strategies should make investors more diligent about exploring strategies, and he discusses single-stock options versus index options and the risk-reward picture with each. DiBernardo notes that covered-call strategies aren't right for people "who believe the market will keep going straight up from here," but he notes that for nervous investors, the options strategy acts like portfolio insurance and the discount on a closed-end fund can help to make up for the upside potential that the strategy trades for that protection.