Technique: Covered Calls
What is a Covered Call?
Writing Covered Calls involves selling call options against your stock holdings. By doing so, investors can gain consistent monthly income from their stock portfolios without selling the stocks and regardless of market direction. The covered call technique has nothing do with the risky practice of speculating or trading the markets with options; in fact, it is the complete opposite. Covered Call sellers earn income from selling option contracts to speculators and traders!
Here’s an example of a Covered Call trade. You purchase (or already own) 100 shares of X Corporation. The current selling price of a single share of X Corporation is $25 per share. You sell a call option to a speculator for $1 per share, which is an instant return of 4%. The cash is deposited into your account immediately. The call option gives the speculator the right to purchase your stock from you for $25 per share at anytime until the option expiration. If the stock goes up, the investor buys your stock, you keep your 4% and you pick another stock next month. If the stock goes down, again you keep your 4% and now you’re able to sell additional call options against that same stock!
If you own stocks that you don’t want to sell, that’s not a problem. We’ll teach you a modified method that earns consistent income without ever having to sell your stock. If you are not selling Covered Calls, you are leaving significant sums of money on the table each month. That’s like owning rental property and not renting it out!
- Involves selling call options against stock holdings.
- Allows investors to gain consistent monthly income from their stock portfolio without selling the stocks, regardless of market direction.
Benefits of Covered Calls
- Great strategy for novice traders
- Controls risk by giving you control
- Works regardless of whether the stock goes up or down
- MMT teaches a rules-based approach that has a proven track record
- Can be traded in 401(K) and IRA
Risks of Covered Calls
The risk in trading Covered Calls is the stock itself, but if you own stocks you are already taking that risk. Covered Calls do not add any additional risk! At MMT, you will learn how to choose conservative, safe stocks that will remain in business. You will choose stocks that are biased to go up, but if they go down that’s not a problem because MMT will teach you to earn money in either direction. The only risk is if the company goes out of business, which is why MMT sets stringent criteria for purchasing new stocks. As long as the stock stays in business and has the usual ups and downs of any market, you’ll be able to earn consistent income.
MMT is a global market leader in Covered Call education services. MMT will teach you how to successfully manage a Covered Call portfolio and how to:
- Select stocks that are optimal for Covered Call transactions in the US markets
- Select the correct option strike price and expiration
- Search the entire US market in an instant for the highest yielding opportunities
- Consistently generate income on rising and falling socks
- Use the most effective defensive techniques to prevent unprofitable callout
Learn more about our Covered Calls Coaching Service. >>
Covered Calls – Conservative
Covered Call investing has been used for many decades. It is a reliable way to generate immediate cash flow on stock holdings. Micro-Moment Trading re-imagined covered call investing by creating a set of management techniques to earn cash flow regardless of whether the underlying stock goes or down. That’s the Micro-Moment Trading difference.