I aim to sell for a lesser value option premium, and, out of the money strike price, with the intent of never having my stock assigned I will aim for a 30 to 45 day expiry date, and keep an eye on the ex dividend date and quarterly earnings announcement I've always found that deciding when to sell a stock has been the most difficult decision factor, which selling the covered predetermines for me Sometimes, several months, or year's will pass with no option selling on any particular stock, depending upon it's price performance I use the Black-Scholles 'greek' analytics to help price the option premium I will sell a covered call only when my stock has broken above it's 10, 20 & 50 day exponential moving average, and upper bollinger band limits Keep in mind that 3 out of 4 options expire worthless, so as the option writer, you are the house, and the buyer is the gambler a stock's chart share price typically looks like a roller coaster ride aim to buy a stock that you would like to own forever try to have no more than 5 -8% in any one equity aim for equities that provide a 3% to 7% dividend, including REIT's invest in 'somewhat boring' equities with solid fundamentals These are some points in investing & option trading that have helped me increase ROI return on my DGI portfolio: Seeking Alpha is a site where we try to share our investing experiences with each other, to find better investment opportunities and improve our return on capital. I agree that option trading does add complication to managing your portfolio, but it is not an unnecessary useless exercise. The annualized yield available from covered calls for the 3 companies discussed in the video are: Please see the video for implementation examples. The video also includes detailed examples of 3 covered call strategies. Said another way, covered calls allow you to generate more portfolio income in exchange for a capped payoff profile while also allowing you to generate passive income from companies that don’t pay dividends. This allows you to receive the option premium upfront in exchange for a capped upside. In a covered call options strategy, you sell a call option for a security that you already own at least 100 shares of. If the contract allows the optionholder to sell the security, it is a put option.Įach stock option corresponds to 100 shares of the associated security, which is called the “underlying.” This is a very important concept to understand, and makes the covered call strategy unsuitable for investors that have only small amounts of capital invested in the stock market. If the contract allows the optionholder to buy the security, it is a call option. "A stock option is a contract between two parties in which the stock option buyer purchases the right (but not the obligation) to buy/sell 100 shares of an underlying stock at a predetermined price (called wwthe strike price) from/to the option seller within a fixed period of time." Here’s the formal definition of a stock option: To being learning about the covered calls strategy (which is a beginner options trading strategy) you need to have a fundamental understanding of stock options. We also wanted to provide a text summary of the video, for people who prefer to learn through reading (rather than through watching videos). Covered call example #2: Microsoft ( MSFT).How to select which covered calls to sell.What is a covered call options strategy?.This video is a comprehensive discussion of the covered calls option strategy, and covers the following topics: In today’s video, I’m going to explain how you can generate higher portfolio income by implementing a covered call option strategy. There are two ways to reach this goal faster: have a larger portfolio or generate a higher portfolio yield. The end goal of many dividend investors is to generate enough portfolio income to cover their living expenses.
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