Covered call writing is an investment strategy that can help you earn consistent monthly income. They have limited risk and are so safe that big hedge funds use them as well as everyday traders. You can use them in any situation, whether the market is up or down.
It is important to pick your stocks wisely. Stick to stocks with high quality and preferably a dividend as well. Strong earnings are important for growth. Take time to do the research necessary.
To be a successful options trader you must first learn how to do it. The basic process for writing covered calls is to buy some shares of a stock that you like, then write or sell a covered option against those shares for gains. You can also do this with shares that you already own. Option premium refers to the gains you make. At expiration time, there are two ways you can play out your trade. The first way is to sell the underlying stock and keep the gains or premium for your profits, or instead, keep the stock and write more options for the following month at expiration.
Don't worry about down trending stocks. You can easily hedge against it using options tools. When you marry a call with a put you get protection from the downside. Use puts when you're not sure whether the stock will go up or down or if you think it will go down. This is a strategy that works in up and down cycles and helps to protect your investments. It is also a good way to manage your risk.
Statistics show that close to 90 percent of options end up expiring flat and worthless. This is good for the seller. At expiration time if your option has not been exercised then it will become flat and you will get to keep the premium.
It is important in all types of trading to write down your trading plan in advance. This way you will know what to do if the stock goes down or up quickly. Volatility as a key factor should be learned and kept track of as it can affect the price of stock options.
Covered call writing is an effective trading strategy that can produce 3-10% gains or more on a monthly basis. As with any form of trading, there is limited risk involved and it should be managed properly. Correct skills and knowledge are needed to be successful at it. Do your homework and trade at your own risk.
It is important to pick your stocks wisely. Stick to stocks with high quality and preferably a dividend as well. Strong earnings are important for growth. Take time to do the research necessary.
To be a successful options trader you must first learn how to do it. The basic process for writing covered calls is to buy some shares of a stock that you like, then write or sell a covered option against those shares for gains. You can also do this with shares that you already own. Option premium refers to the gains you make. At expiration time, there are two ways you can play out your trade. The first way is to sell the underlying stock and keep the gains or premium for your profits, or instead, keep the stock and write more options for the following month at expiration.
Don't worry about down trending stocks. You can easily hedge against it using options tools. When you marry a call with a put you get protection from the downside. Use puts when you're not sure whether the stock will go up or down or if you think it will go down. This is a strategy that works in up and down cycles and helps to protect your investments. It is also a good way to manage your risk.
Statistics show that close to 90 percent of options end up expiring flat and worthless. This is good for the seller. At expiration time if your option has not been exercised then it will become flat and you will get to keep the premium.
It is important in all types of trading to write down your trading plan in advance. This way you will know what to do if the stock goes down or up quickly. Volatility as a key factor should be learned and kept track of as it can affect the price of stock options.
Covered call writing is an effective trading strategy that can produce 3-10% gains or more on a monthly basis. As with any form of trading, there is limited risk involved and it should be managed properly. Correct skills and knowledge are needed to be successful at it. Do your homework and trade at your own risk.
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