One of the most common strategies taught to most investors and traders starting out in options is called the covered call strategy or buy-write. A covered call strategy utilizes both stock and that same underlying’s option contract.
You would typically sell a call option contract at a higher strike from where the current prices of the stock is trading. 1) The price of your stock goes higher and goes above the strike of the call contract you sold. 2) The price of the underlying does not move into that strike of the call option you sold by expiration of that option.
Most start with just trading shares of stock in companies and never expand their knowledge outside of that realm. This strategy is taught to help most long term investors enhance their return on investment by selling call option contracts.The covered call strategy is pretty simple to create in your brokerage account. Since one stock option contract represents 100 shares of that underlying issue, you would want to sell 10 call option contracts. By selling a call option, the trader is giving someone the right to purchase their stock at the strike price on or before expiration in exchange for a premium.
You still own the stock of the company and you also have the premium you collect from that option contract.
You will also take in the premium you collected when selling the call option contract on top of the profits you already have from the stock moving higher.
This strategy is taught to help most long term investors enhance their return on investment by selling call solution contracts.
One of the most common strategies taught to many investors and traders venturing out in options is known as the covered call strategy or buy-write.
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