I love the covered calls option strategy but don’t miss the basics. Watch Thomas’ video on How to Trade Options for the basics you need to get started! https://youtu.be/ryE_WHEX-JY
The covered call strategy is by far my favorite options investing strategy and probably one of the easiest you’ll find. You can sell covered calls for income, to reduce your risk or to get your favorite stocks at a discount! These options strategies help you cash flow ANY stock!
In this video, I’ll explain the covered call strategy. I’ll show you all the call option basics, why you might use covered calls and the risks involved. Then I’ll share how to start covered calls options trading with a step-by-step of what to do. I’ll be using lots of examples on Tesla calls and Amazon calls to help you.
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Call options basics are really easy so I don’t want to spend too much time but these are just investments that give you the right to buy a stock at a certain price up to a date in the future. The best part about call options is they allow you to do things in a stock that might be too expensive otherwise. For example, you need over $3,000 to buy a share of Amazon but I can use call options for a fraction of that price.
In fact, I’ll show you how to use Amazon call options to buy the shares for hundreds instead of thousands or to get a discount of as much as 15% on the stock.
The covered call strategy is owning a stock and then selling call options against it. The call option buyer pays you a premium now for that right to buy the shares later, so that’s cash you collect right now. It’s a great way to turn your stocks into dividend stocks without them paying a dividend.
You can sell covered calls for income, to reduce risk or get discounts but there are risks. The biggest risk is that the share price jumps and you miss out on some of the gains but I’ll show you how to set the strike price of your call option so you still make money.
Starting covered calls trading is very easy. All you really need is to know what strike price and what date you want to sell against your stocks. That’s going to make sure you maximize your cash flow but minimize the chance of losing your shares.
2:12 Call Options Basics
2:40 Amazon Call Options Example
5:35 What is the Covered Call Strategy?
5:50 Amazon Covered Call Example
7:06 Reasons to Use the Covered Call Options Strategy
8:01 How to Use Covered Call for Income
10:14 Risks to Covered Call Trading
12:45 How to Set Up Covered Calls
13:34 How to Pick the Options Expiration for Covered Calls
14:36 How to Pick the Strike Price for Covered Calls
15:47 How to Sell Call Options for Covered Calls
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
