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Learn The Covered Call.
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Why Is The Covered Call Such A Popular Trade?
First of all, this trade is really easy to understand. You own a stock, you sell a call against your stock. When you sell the call option, you are promising you will sell your stock at a fixed price and you are getting paid a premium for that.
For example, let's say you bought a stock at $100 per share. You could sell a call option that expires in 30 days at strike price 105 and get paid maybe $2.00 per share for that option. You are promising you will sell your stock at $105 in the event it rises to say $110. So, you are capping your upside here. However, you will keep the $2.00 per share of credit and still make $5.00 per share of profit on the stock. So, you would be profitable $7.00 per share in that trade overall in 1 month. Still a 7% return on investment.
When the stock remains flat and stays at $100 per share over the course of those 30 days, instead of not making any money, you'll have the $2.00 per share of profit from the call option. Therefore, you'll still have a 2% return on investment in 1 month.
You can clearly see why this is a fantastic use of options for income generation.
There are ways to adjust the call option when the stock rises to avoid selling your stock at $105. We teach that in our paid memberships. There are also other options that can be used to give you much better downside protection, which we'd love to show you.
Learn more in a free class or call us directly at 1-888-297-9165 to schedule a free consultation.
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