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Writing Covered Calls is a conservative technique where you purchase a stock that you want to take a position in and then write a call option against that stock.
This is a cash generating technique that not only offers disadvantage protection that you otherwise would not enjoy if you simply purchased the stock, but also gives you the power to generate a regular monthly earnings, for only mins of your time.
However as with all option trading secrets, there are problems that you’ll need to avoid if you’re to be constantly moneymaking.
Always check the basics of the base stock and confirm that you’d be pleased to own even if options failed to exist.
Don’t enter a Covered Call trade because the option premium looks tasty. Higher option premiums ( 10-15% or more ) regularly mean the stock is more uncertain i.
I myself target the bigger, more liquid and stable firms with monthly call option premiums between the 3-6% range. At times the Naz Tracking Unit ( QQQQ ) is also enticing ( a three percent yield is the highest I have ever seen it though ).
Don’t hold stocks at least two days either side of revenues headlines. You can always buy back in afterwards anyway.
Always have a look at stock charts when selecting a stock to pen covered calls on. Trailing Stops This order enables you to capture the majority of an options move with no need to adjust your stops.
