Covered call strategies are an investment technique that can generate income on a portfolio of stocks, or even without a portfolio of stocks. This strategy has been previously overlooked, but it works in both bull and bear markets. It is essentially a neutral to bullish strategy where an investor sells an out-of-the-money call against every 100 shares of stock they own, while simultaneously collecting a premium. If the option expires, the trader can keep the stock and sell against it again. If the worst-case scenario happens and the stock is called away, the trader still keeps the premium earned.
One benefit of the covered call strategy is that it can snowball into a true compound effect and generate side income. The strategy is a low-risk way of using options and can also be used to hedge risk by giving compensation. Additionally, it is a monthly income strategy that can be used with a steady stock.
However, it is important to note that if the stock is volatile, the risk of options being underpriced is higher. Furthermore, it is not advisable to use the covered call strategy if the stock price is expected to make a big move in the near future. Overall, the covered call strategy provides an opportunity to generate income and mitigate risk.
Serge is currently putting together a 3-hour course on covered calls to take place in the near future, so stay tuned for details on that. If, in the meantime, you have further questions about covered calls, feel free to email support@thesteadytrader.com. If interested in having a covered call strategy done for you, head over to Blue Marlin Advisors.
What You’ll Learn:
- How to create a covered call.
- What can go wrong with a covered call.
- How a covered call can be a monthly income strategy.
- And much more!
Favorite Quote:
“A covered call is one of those forgotten strategies.” -Serge Berger
