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The covered call options strategy is very popular among long-term stock market investors.
A covered call consists of selling or “writing” one call option against 100 shares of stock, which effectively reduces the cost of the shares and creates downside protection.
If the stock price is below the call’s strike price at expiration, the investor will keep 100% of the premium they collected when selling the call option. The process can then be repeated in the next expiration cycle.
In a perfect world, the investor can keep selling calls to create a stream of monthly income as the options continue to expire worthless. In reality, it’s likely that the stock price eventually ends up above the short call’s strike price at the time of expiration, and the investor will be forced to sell their shares of stock at the call’s strike price.
The downside of the strategy is that by selling a call against the shares, the investor gives up their profit potential on the shares above the strike price of the short call.
In this video, we’ll break down everything you need to know about the covered call strategy and show numerous historical trade examples to demonstrate how covered calls can be expected to perform in various scenarios.
– What is the covered call strategy and how is it constructed?
– How to set up the strategy on the tastyworks trading platform
– Walkthroughs of historical trade examples with profit/loss visualizations
– How to keep your shares at expiration when trading covered calls
– Frequently asked questions
Be sure to leave a comment down below with any questions you may have!
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=== RECOMMENDED VIDEOS/RESOURCES ===
Options Trading For Beginners (PLAYLIST): https://www.youtube.com/playlist?list=PL33AZa4cv-o58ldr-5zSn4ROx4SZG7Jyo
tastyworks Tutorials (PLAYLIST): https://www.youtube.com/playlist?list=PL33AZa4cv-o56a2BO3jpK_PBUFe3FdvxP
Option Pricing EXPLAINED: https://youtu.be/-nnJ4pMBaxA
Options Trading 101: https://youtu.be/3bELT5FZCic