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.
The reason that this is such a popular method of income generation is that it is relatively safe. What you do is select a stock that you are comfortable owning and then write calls that are either at the price you paid for the security or are more than what you paid for it.
There are two reasons for selecting an out of the money or at money price. You need to keep in mind that you always want to make money. Therefore you should never sell a call for less than the price you paid for your stock. For instance, if you brought a share of a company for ten dollars you would not want to sell it for five dollars. You want to sell it for at least ten, preferably more.
What a person next has to do is determine what type of investment they feel best with. Many people look for a company that they are familiar with. This is fine but what is important to remember is that you will need one that is going to have decent volume. There is no reason that you cannot get both at the same time.
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.
When you engage in covered call selling you stand to make steady income. What you need to do is make sure that you have selected a security that you are comfortable owing and will not want to sell. This is the reasons that many people choose safe stocks or investments in companies that are holding gold. These funds and stocks have value and are highly traded.
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.
The reason that this is such a popular method of income generation is that it is relatively safe. What you do is select a stock that you are comfortable owning and then write calls that are either at the price you paid for the security or are more than what you paid for it.
There are two reasons for selecting an out of the money or at money price. You need to keep in mind that you always want to make money. Therefore you should never sell a call for less than the price you paid for your stock. For instance, if you brought a share of a company for ten dollars you would not want to sell it for five dollars. You want to sell it for at least ten, preferably more.
What a person next has to do is determine what type of investment they feel best with. Many people look for a company that they are familiar with. This is fine but what is important to remember is that you will need one that is going to have decent volume. There is no reason that you cannot get both at the same time.
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.
When you engage in covered call selling you stand to make steady income. What you need to do is make sure that you have selected a security that you are comfortable owing and will not want to sell. This is the reasons that many people choose safe stocks or investments in companies that are holding gold. These funds and stocks have value and are highly traded.
About the Author:
Born To Sell's website offers more information about covered call trading. If you're looking for covered calls help, check out Born To Sell.
No comments:
Post a Comment