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Any particularly good strategies for covered calls?

Recs

4

December 18, 2010 – Comments (6)

Seems like a good strategy and a little bit of free money.  Does anybody have any links or book suggestions or their own strategies for making extra by selling covered calls?

6 Comments – Post Your Own

#1) On December 18, 2010 at 2:17 PM, 100ozRound (29.50) wrote:

Options Industry Council has a great course on options.

http://education.optionseducation.org/course/

There is a section on Covered Calls that I can't directly link because it requires registration.  I highly recommend this course!

Oh yeah - it's 100% free too!

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#2) On December 18, 2010 at 3:56 PM, anchak (99.84) wrote:

The best online Options resource is the series of pieces from Interactive Brokers.

 

And a very good options investing book is 

 


"Options for Strategic Investment"

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#3) On December 18, 2010 at 5:02 PM, Valyooo (99.47) wrote:

Thanks guys you're the best

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#4) On December 18, 2010 at 5:43 PM, familyfund2 (21.31) wrote:

I recced this, and am following it, so i hope you will keep us posted.

I also thought covered calls sounded like a simple way to get some game on. How's that work? I possibly have part of this wrong.

1 you own 100 shares of x

2 you agree to sell them if stock reaches upper limit, and collect a premium for writing the contract

3 if the stock sinks or doesn't reach strike you keep the premium and stock

3.1 repeat

3b stock does reach strike and you sell 100 shares, keeping both the premium and the difference, but ending without stock.

 ???

That works with my other simple favorite, Selling Puts. I sometimes think this would be one way to build a position; selling puts and collecting premium until you someday get the stock. Then continue to do the same thing until you have the amount of position you want.

Buy in a little at a time. Use the money even when you're not using it. Maybe even get a div.

 So, do me a favor and point out if i have those terms wrong. I still need refresher.

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#5) On December 18, 2010 at 11:14 PM, 100ozRound (29.50) wrote:

familyfund2

You pretty much have it down.

Some people use covered calls to collect income on a stock they own.  Others look at it as reducing their cost basis in a stock. You can theoretically reduce your cost basis to zero by using a covered call strategy; just keep rolling forward the calls when (if) they expire worthless. Just make sure you have 100 shares of underlying stock per 1 contract of calls sold.  Otherwise, if you are assigned, you have to buy the difference in shares at market price in order to sell them lower (at the exercised strike price).

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