Writing Covered Calls
The Ultimate Guide to Writing Covered Calls
Covered calls are one of the most popular option strategies available. They can be an excellent way to generate monthly cash flow while reducing your risk of investing in the stock market.
Writing Covered Calls
Your Guide to Writing Covered Calls
Income investors can sell covered calls on a regular basis to collect premiums. Covered calls can also be used to exit an existing stock position or to achieve limited downside protection. While simpler than most option strategies, writing covered calls requires a basic understanding of options and how they work.
In this guide, we take you through everything you need to know to get started writing covered calls, as well as link you to resources and articles to develop your knowledge!
Writing Covered Calls
What is a Covered Call?
When you write (or sell) a covered call, you are selling the call buyer the right to purchase shares of stock that you own at an agreed-upon price (the strike price) within a specified time frame (the expiration date).
For example, if you owned a stock currently trading around $43 per share, you could sell a call option that expires next month and has a strike price of $45. Two things can happen:
- If your stock stays below $45 before the call expires (next month), you keep both the stock and the option premium.
- If the stock rises above $45 before the call expires, the buyer exercises the call, buying the stock from you for $45 per share. You get the money from the sale of the stock and the premium, but you no longer own the stock.
A buyer has the right to exercise their option up until the expiration date. If that happens — meaning the stock is called away — the shares are automatically delivered to the buyer. Options typically expire on the third Friday of every month.
Generally, when you buy a call option, you need the share price to move higher in order to make money and you also need it to happen within a relatively short time-frame. With each day that passes, options decay in value, which is bad for the buyer (but great for the seller). This makes call options a great choice for sellers looking to make a profit off stocks they already own.
What is in the Ultimate Guide?
Writing Covered Calls
This free eBook includes 36 pages of material devoted to writing covered calls. This is the perfect guide for any new covered call investor.
Covered Calls Uses:
- Collecting Income – Immediately earn option premium
- Downside Protection – Offset stock price declines
- Exiting Stock Positions – Set your exit price and timeframe
Tips for Covered Call Screening
Instruction on choosing the right stock, expiration, and strike prices.
5 Printable Handouts
They include a position management worksheet, cost worksheet, 5 tips for new covered call writers, and more!
Managing Positions & Outcomes
Understand expiration outcomes, including buying to close, assignments, and rolling.
About Us
Snider Advisors is a boutique, SEC-registered investment advisor. As professional covered call advisors, we have a fiduciary responsibility to our clients and a verifiable track record since 2002.
We have an extraordinary focus on training and empowering both novice and experienced investors to generate a paycheck for monthly income. We promote self-management of your funds to avoid costly management fees, for a more secure and prosperous retirement. While we professionally manage approximately $75 million for clients, the Snider Investment Method, the powerful system thousands have learned to use and trust, accounts for over $100+ million in client-managed assets.
Unlike most advisors, we don’t manage money behind closed doors – instead, clients appreciate the transparency and education we provide, making them highly informed and confident investors. As a matter of fact, we use the same method to manage client assets that we teach clients to use to successfully manage their portfolios.