Learn To Really Profit From Your Stocks. Writing Covered Calls.

For quite a while getting stock and holding it until you retired or maybe until the share price had risen a great deal had been the most popular approach. But with stock markets domestic and even abroad in unsure territory some are starting to seek out another solution to the ‘buy and hold’ trading strategy.

Imagine there is a way to always cash in on retaining the stock long-term? Once such technique is simply by writing covered calls on the stocks you already own. Writing covered calls or simply selling call options enables you to create a monthly source of income by giving someone the right to buy your stock. One bonus to this option trading strategy is you could implement it without the need of acquiring new shares. Providing you have a least 100 shares of any one stock you could start creating an extra monthly premium instantly.

In a market that is moving up or even sideways, selling covered calls could be a significantly rewarding investing strategy. The less action the market or perhaps your particular stock has, the less likely you are to be ‘called out’ when writing covered calls. Volatility can be your adversary when ever selling covered calls as a strategy. However a stock could hover around the same price for an entire year and you could possibly still create profit from maintaining it every single month. Simply speaking; you don’t need the stock to go higher to make money with this strategy.

Now what goes on in the event the market really does venture lower? You can normally get back the call options you sold thus closing out the position. In case things grew to be too serious, the possibility exists of selling the shares of stock after you have bought the call options back. Don’t wish to sell your stock despite the fact that the market’s heading south? Take into consideration purchasing a put option which would increase in value as the price of the stock diminishes. Investing in a put during this situation might possibly be more of an insurance coverage rather than a wealth creation technique.

So if your stock as well as the market on the whole head into negative territory, how will you know when to buy the call option back and think of perhaps selling the stock? Really easy computation: any premium you obtained once you sold your calls would be the primary breakeven point. Receive $150 through selling one contract ($1.50 x 100) then your breaking position would be $1.50 less than what the stock was initially when you sold the covered calls.
Whatever the amount one option was initially sold for, in this case it was $1.50, becomes the maximum to how far the stock can fall before your profit from writing the calls vanishes. For those who have been writing covered calls with a stock for greater than a month your general breakeven could possibly be lower if you tally up the monthly revenue generated since beginning this strategy.

Of course when talking of selling covered calls, we have not made mention of any dividends received from holding your stock. For our purposes we do not look at dividends as a strategy as you really have no control when and if a company chooses to issue dividends to its stock holders. Selling call options as a consistent money making addition to your portfolio can be achieved if you are willing to put in the time to practice honing your skills. It may seem like a strategy that is only for the pros, but you can master selling covered calls with consistency and patience.

For information on selling call options or how writing covered calls can benefit you visit us online at www.writing-covered-calls.com today.