Covered Calls Are a Great Way to Earn Additional Income From Your Stock Portfolio
The rumors are true about covered calls.
You can use them to make double-digit returns from the stock market and earn a steady monthly income from your stock portfolio.
You have to first learn about stock options before you are able to use this strategy.
The learning curve for stock options is usually what prevents most people from ever learning about covered call options.
You also have to become familiar with selling stock options.
Selling is called "writing" in the world of stock options.
So when you hear someone talk about writing call options they are just referring to someone selling covered calls.
Covered Call Analogy The process that an option seller goes through is similar to how a car dealer leases cars.
Suppose a dealer leases a car to someone.
The way these leases work is that the buyer pays $X a month for a set period of time and at the end of that time period they have the "option" or the "right" to buy the car at the agreed upon price.
If they choose not to buy the car and want to turn it back in, they lose out on all the money they paid the dealer.
However, if they choose to buy the car, they pay the agreed upon price and the dealer has to deliver the car to them.
The dealer now has one less car on his lot, but he/she is not worried because they get to keep the lease money that was paid while the buyer drove the car for the first few years.
So How Does Selling Covered Calls Work? You're selling stock options, more specifically a call option.
This type of option gives the buyer the right to buy stock from you.
You have to already own the stock though.
So if you own 100 shares of company XYZ, you would sell 1 call option to someone giving them the "right" to purchase the stock from you.
In exchange for selling these rights, the buyer is going to pay you money.
This money is yours to keep no matter what happens in the future.
You can repeat this strategy every month and earn a nice monthly income.
Over the span of a year it can amount to a double-digit return on your investment.
If the buyer decides not to buy the stock from you then you keep your stock and the money you were paid for selling the option.
Otherwise, you would have to deliver them the shares of stock.
You can use them to make double-digit returns from the stock market and earn a steady monthly income from your stock portfolio.
You have to first learn about stock options before you are able to use this strategy.
The learning curve for stock options is usually what prevents most people from ever learning about covered call options.
You also have to become familiar with selling stock options.
Selling is called "writing" in the world of stock options.
So when you hear someone talk about writing call options they are just referring to someone selling covered calls.
Covered Call Analogy The process that an option seller goes through is similar to how a car dealer leases cars.
Suppose a dealer leases a car to someone.
The way these leases work is that the buyer pays $X a month for a set period of time and at the end of that time period they have the "option" or the "right" to buy the car at the agreed upon price.
If they choose not to buy the car and want to turn it back in, they lose out on all the money they paid the dealer.
However, if they choose to buy the car, they pay the agreed upon price and the dealer has to deliver the car to them.
The dealer now has one less car on his lot, but he/she is not worried because they get to keep the lease money that was paid while the buyer drove the car for the first few years.
So How Does Selling Covered Calls Work? You're selling stock options, more specifically a call option.
This type of option gives the buyer the right to buy stock from you.
You have to already own the stock though.
So if you own 100 shares of company XYZ, you would sell 1 call option to someone giving them the "right" to purchase the stock from you.
In exchange for selling these rights, the buyer is going to pay you money.
This money is yours to keep no matter what happens in the future.
You can repeat this strategy every month and earn a nice monthly income.
Over the span of a year it can amount to a double-digit return on your investment.
If the buyer decides not to buy the stock from you then you keep your stock and the money you were paid for selling the option.
Otherwise, you would have to deliver them the shares of stock.
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