Increase Monthly Income By Writing Covered Calls

If you are looking for a conservative investment opportunity, you might wish to check into writing covered calls. To write a call option means to sell it, but you cover the call option by owning the stock or securities mentioned in the option contract. In many cases, these kinds of options are bought and sold and the traders do not own the stock, they only own the options. When you own the stock to the options you have more chances to turn a profit. Here is additional information on writing covered calls strategy.

When call options are sold, the writer is paid a premium on each share of the contract. This means that a 100 share contract will earn $300 at three dollars a share. This money is yours to keep no matter what occurs. You are also the one who sets the amount for the strike price of the stock or commodities.

When you sell your covered call options you receive a premium for each share. For example, a contract with one hundred shares may give you two dollars premium per share for the option. No matter what happens, you receive two hundred dollars. You also set a strike price that your stock can be purchased at.

Maybe you want to sell an option contract for 100 shares of stock and a strike price of $60. You might have paid $45 per share for the stock, originally. If the price goes all the way up to $70 a share, your option holder will buy your stock at $60 a share. However, you make money from the premiums and also from selling your stock.

Suppose you sell a contract for one hundred shares of stock with a strike price of fifty dollars. Your original purchase price is forty dollars per share. The stock may soar to sixty dollars per share. When this happens you are going to lose your stock as the owner of the option will be able to make money. However, you are still making money on your stock sale and your option premium.

Writing covered calls also works well for the trader who is in the market to buy stocks. Instead of buying and selling stocks for profit, you can sell options on stock that you buy. This puts more of the risk factor under your control, as you set the terms.

If you study it, you will see that writing covered calls for trading is a relatively safe and conservative investment. You can make money from stock or investments that you own without having to sell them. You also make profit through the sale of option contracts.

Born To Sell’s site is exclusively about covered calls. Use this link to go to Born To Sell’s website on covered call options.

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