Search:

Selling Covered Calls

The covered calls options trading strategy provides traders the ability to generate additional income from investments in a neutral market. An options trader who wishes to benefit from a fairly neutral market may consider selling covered calls. Selling covered calls is the selling of calls on an asset (stock) owned by the trader at a price point which he or she is wiling to sell this asset (stock) at.
The time decay benefits to the side of the options seller and the closer the time to expiration, the more the sold call looses value, thereby increasing the likelihood of profit - even in a neutral market.
The following trading strategy delivers some benefits:

A trader receives a premium when he or she sells call options on a previously purchased stock that he or she is willing to sell at a specified price.
If the stocks a trader owns is below the strike price upon expiration the trader retains the premium as a profit.
If the stocks owned is above the strike price upon expiration the trader may have to completely or partially return the premium or even more. However, the trader will receive a higher profit through the sale of the owned stock's rise in value.
If the stocks drops in price the trader's loss is reduced by the premium received from the sold options calls.

By selling covered calls the options trader may see limited profit in the event of a strong up-rally when the call options would probably be exercised and the call seller would be obliged to sell the asset at the strike price. If the price rockets upward the trader could even experience losses.
The following options strategy could be used when a trader owns stocks and he or she expects a decline in the stock's price however is not willing to sell the stock. In this case a premium received for options call helps to offset the price decline.
As a rule with this strategy the out-of-the-money options calls are sold. The in-the money options call could be sold as well, and in such case the collected premium is higher, however the risk is greater as well. Options 1-2 months to expiration would deliver a lower premium, however they are considered less risky.
If a trader expects the owned stock to rise in price, the covered call options trading strategy can be used to produce additional income while he or she stands on the position waiting to sell the stock at a premium. If a trader expects a strong downside move, it is probably better to sell the owned stocks.

Article Source: http://www.orbitaloc.com/

For more information visit NOS - Options Signals and Options Trading who generate options trading signals based on MV volume and advance decline stock charts.

Please Rate The Above Article From The Finance & Investment Category
Article Title: Selling Covered Calls

# of Ratings = 3 | Rating = 5/5

Syndicate Finance & Investment Related Articles Via RSS!

Boost your websites' search engine ranking! Attract more repeat visitors!
Automatically, consistently update your content via Really Simple Syndication (RSS). To syndicate the above article and other Finance & Investment related articles on your blog or site, simply click on the XML Icon above to grab the RSS feed -- It's FREE!

Subject to Orbitaloc.com's Publisher Terms of Service, you may reprint this article on your own website, blog, and ezine. (English only) You may also syndicate the article via Really Simple Syndication (RSS). It is free of charge.

Free Articles on Finance & Investment and Other FREE Content Article Topics
The preceeding is an informative article from the Finance & Investment category.

Visit Our Sponsor for 2 Free Quarts of Liquid Vitamins

Additional Articles From - Home | Finance & Investment

No Income Proof Secured Loans: Worry Free Cash Service - By : kenneth robert
Are Debt Consolidation Loans Helpful? - By : James Copper-5768
Make your life simpler with the help of a home equity loan - By : Pradeep.
Make Money Online Fast, Trading In Currency With Forex Automoney! - By : Larry D. Johnson
The Land Loan Process - How Long Does it Take - By : Shawn Kohan
Choosing A Mortgage Lender - By : Shawn Kohan
Things to Know Before Choosing A Debt Settlement Company - By : shane123
Remove Charge Offs - By : Justin Hutto
Customers Come First at Utility Warehouse - By : Tone Jarvis
Key Options In Getting Debt Help - By : Todd Stevens

	Print This Article
	Post Comment
	Add To Favorites
	Email to Friends
	Ezine Ready

Top Authors
Most Popular Articles
Ezine Notifications
Article RSS Feeds

Liquid Vitamins
Body Balance
Colon Cleanse
Nutritional Supplements
Website Design

Resources