Make Money By Writing Covered Calls
Anyone who is looking to get income from the stock market should look into covered calls. These financial instruments are a great way to provide yourself with safe income while not having to day trade in the market. There are a few things that need to be understood in order make a profit. Bellow are some of the basics as well as a primer on how to go about picking stocks to use.
The first thing to understand is what exactly a covered call is. What it essential does is allow someone to buy a stock at a particular price. This means that a person who buys the call option is going to be able to purchase a stock at a particular pre-set price.
What you need to do is determine what type of stock is right for you to use. Many people suggest using a strategy that buys a highly traded stock. This is because the more volume the more option activity. This is a great thing to look for when you are going to be buying a security.
The next thing is to be safe and secure in your pick. You do not want to own some company where there is little security in owning it. This is why exchange traded funds that deal in gold are so popular. People love gold and it is always highly traded. So what a person could do is buy a gold fund or a gold mining stock and then sell options on it. They would make income on their investment even if the stock was never called away.
The next thing is to pick a stock that has a decent amount of volume. The most popular stocks for options trading are those that have decent amounts of trading. This is why it is popular to select a security that has daily trading volume that is high compared to the rest of the market.
When you are looking to sell options you want two things. A decent premium and decent volume. Some people buy a lot of shares of a stock so they can sell for a small premium. The other way is to buy fewer shares of a company and then sell closer to the buy price. This will sometimes result in the stock being sold however if you plan your numbers right you
You will also want a stock that has some form of value. It is important to remember that this is a stock that you are going to be keeping in your portfolio. This security is not something that you are going to hold for a short time and then sell. Therefore it is important that you pick something that is not going to drastically fall in value.
A covered call strategy has been employed for years by large mutual funds and exchange traded funds in order to benefit their clients. Now you too can do the same thing with your own portfolio. This style of investment is going to be safe because there is little downside and a relatively consistent upside. As long as you put the correct sale price in when you sell your call then you will not have a problem.
The first thing to understand is what exactly a covered call is. What it essential does is allow someone to buy a stock at a particular price. This means that a person who buys the call option is going to be able to purchase a stock at a particular pre-set price.
What you need to do is determine what type of stock is right for you to use. Many people suggest using a strategy that buys a highly traded stock. This is because the more volume the more option activity. This is a great thing to look for when you are going to be buying a security.
The next thing is to be safe and secure in your pick. You do not want to own some company where there is little security in owning it. This is why exchange traded funds that deal in gold are so popular. People love gold and it is always highly traded. So what a person could do is buy a gold fund or a gold mining stock and then sell options on it. They would make income on their investment even if the stock was never called away.
The next thing is to pick a stock that has a decent amount of volume. The most popular stocks for options trading are those that have decent amounts of trading. This is why it is popular to select a security that has daily trading volume that is high compared to the rest of the market.
When you are looking to sell options you want two things. A decent premium and decent volume. Some people buy a lot of shares of a stock so they can sell for a small premium. The other way is to buy fewer shares of a company and then sell closer to the buy price. This will sometimes result in the stock being sold however if you plan your numbers right you
You will also want a stock that has some form of value. It is important to remember that this is a stock that you are going to be keeping in your portfolio. This security is not something that you are going to hold for a short time and then sell. Therefore it is important that you pick something that is not going to drastically fall in value.
A covered call strategy has been employed for years by large mutual funds and exchange traded funds in order to benefit their clients. Now you too can do the same thing with your own portfolio. This style of investment is going to be safe because there is little downside and a relatively consistent upside. As long as you put the correct sale price in when you sell your call then you will not have a problem.