Covered Calls

Tutorials - Video Tutorials

Suppose you own 1000 shares of stocks and it’s trading at $52 a share. And you think that’s what its worth but it isn’t paying much of a dividend. You plan to hold it till it reaches $55 per share, whenever that is. But why wait when you can sell a $55 call and take a premium at say 1500 or so. And you could continue to do that every few months. So over the course of a year, you might take in about $5000. That’s like collecting a 10% dividend. So you don’t even have to get off the couch. Make money while you enjoy yourself.. And what do you have to give up? Only your promise to sell the stock if it reaches $55, which you want to do anyway. And that’s what they call a covered call.

DISCLAIMER: This is an educational site. The trades suggested on this site are examples to help the readers understand the principals of option trading. They are not intended as "tips" for actual trading and are suggested so that the reader can enter and follow hypothetical trades in the portfolio manager.

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