Covered call trading strategies for enhanced investing profits

Call options and put options are the two primary type of option strategies. Below is a brief overview of how to provide from using call options in your portfolio.

A call option provides an investor with the right, but not the obligation to purchase a stock at a specific price. This price is known as the strike, or exercise price. Other important contract terms include the contract size, which for stocks is usually in denominations of shares per contract.

The expiration date specifies when the option expires, or matures. The contract style is also important and can be in two forms. American options let an investor exercise an option any time before the maturity date. European options can only be exercised on the expiration date. The settlement process must also be known, such as delivering the shares in the case of exercise within a certain amount of time. Read Investopedia's helpful clarification, " American vs.

Writing Options, aka Selling Stock Options, Provides Enhanced Income Opportunity

Buying a call option is the same as going long , or profiting from a rise in the stock price. As with stocks, an investor can also short, or write a call option.

This lets him or her receive income in the form of receiving the option price, or the opposite of the long position. This means the call writer has the obligation to sell the stock to the call option holder if the stock price rises above the exercise price.

In writing call options, the investor who is short is betting that the stock price will remain below the exercise price during the term of the option. When this happens, the investor is able to keep the premium and earn income from the strategy.

To create a more advanced strategy and demonstrate the use of call options in practice, consider combining a call option with writing an option for income. This strategy is known as a bull call spread and consists of buying, or going long a call option and combining it with a short strategy of writing the same number of calls with a higher strike price. In this case, the goal is for a narrow trading range.

The investor will keep the premium income regardless of the situation. The above call option strategies can be combined with a vast array of more exotic positions, but should provide a good introduction to the basics.

At the time of writing Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Three Ways to Profit Using Call Options By Ryan C.

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The Basic Call Option A call option provides an investor with the right, but not the obligation to purchase a stock at a specific price. Combining One Call with Another Option To create a more advanced strategy and demonstrate the use of call options in practice, consider combining a call option with writing an option for income.

Bottom Line The above call option strategies can be combined with a vast array of more exotic positions, but should provide a good introduction to the basics. A brief overview of how to profit from using put options in your portfolio. The adage "know thyself"--and thy risk tolerance, thy underlying, and thy markets--applies to options trading if you want it to do it profitably.

Learn the top three risks and how they can affect you on either side of an options trade. Learn how to buy calls and then sell or exercise them to earn a profit. Learn how this simple options contract can work for you, even when your stock isn't.

Learn more about stock options, including some basic terminology and the source of profits.

Covered calls may require more attention than bonds or mutual funds, but the payoffs can be worth the trouble. While writing a covered call option is less risky than writing a naked call option, the strategy is not entirely riskfree. Options offer alternative strategies for investors to profit from trading underlying securities, provided the beginner understands the pros and cons.

Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered Learn a couple of popular options trading strategies that can be used by investors seeking to enhance their profits from Learn how the strike prices for call and put options work, and understand how different types of options can be exercised Learn what a call option and a long call strategy are, how to speculate stock price increases using a call option and how Learn about stock index options, including differences between single stock options and index options, and understand different Learn what a call option is, what two strategies call options can be used for, and the difference between a covered call An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

A period of time in which all factors of production and costs are variable.

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Covered Call Trading: Strategies for Enhanced Investing Profits by Steven Place — Reviews, Discussion, Bookclubs, Lists

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