For people who want to make income with the stock market one of the best methods of doing this is to use covered calls. A covered call is a type of option where you own the stock and are selling someone the option of buying this security at a future price for a set amount of money.
The first thing to understand is what exactly a covered call is. What it essential does is allow someone to buy a stock at a particular price. This means that a person who buys the call option is going to be able to purchase a stock at a particular pre-set price.
The person who sells the option receives money and is obligated to sell the stock at the expatriation date should the price be met. The reason that it is so safe an investment is that a person can used a covered call option strategy. What this means is that they will own the underlying stock.
The next thing is to be safe and secure in your pick. You do not want to own some company where there is little security in owning it. This is why exchange traded funds that deal in gold are so popular. People love gold and it is always highly traded. So what a person could do is buy a gold fund or a gold mining stock and then sell options on it. They would make income on their investment even if the stock was never called away.
The next thing is to pick a stock that has a decent amount of volume. The most popular stocks for options trading are those that have decent amounts of trading. This is why it is popular to select a security that has daily trading volume that is high compared to the rest of the market.
The next thing you will want to do is determine if the company is something that you are comfortable holding for an extended period of time. Remember, when you are dealing with covered calls it is not a practice which involves the frequent selling and buying of stock. What you are doing is buying a security with the intent of holding it and keeping it.
You will also want a stock that has some form of value. It is important to remember that this is a stock that you are going to be keeping in your portfolio. This security is not something that you are going to hold for a short time and then sell. Therefore it is important that you pick something that is not going to drastically fall in value.
A covered call strategy has been employed for years by large mutual funds and exchange traded funds in order to benefit their clients. Now you too can do the same thing with your own portfolio. This style of investment is going to be safe because there is little downside and a relatively consistent upside. As long as you put the correct sale price in when you sell your call then you will not have a problem.
The first thing to understand is what exactly a covered call is. What it essential does is allow someone to buy a stock at a particular price. This means that a person who buys the call option is going to be able to purchase a stock at a particular pre-set price.
The person who sells the option receives money and is obligated to sell the stock at the expatriation date should the price be met. The reason that it is so safe an investment is that a person can used a covered call option strategy. What this means is that they will own the underlying stock.
The next thing is to be safe and secure in your pick. You do not want to own some company where there is little security in owning it. This is why exchange traded funds that deal in gold are so popular. People love gold and it is always highly traded. So what a person could do is buy a gold fund or a gold mining stock and then sell options on it. They would make income on their investment even if the stock was never called away.
The next thing is to pick a stock that has a decent amount of volume. The most popular stocks for options trading are those that have decent amounts of trading. This is why it is popular to select a security that has daily trading volume that is high compared to the rest of the market.
The next thing you will want to do is determine if the company is something that you are comfortable holding for an extended period of time. Remember, when you are dealing with covered calls it is not a practice which involves the frequent selling and buying of stock. What you are doing is buying a security with the intent of holding it and keeping it.
You will also want a stock that has some form of value. It is important to remember that this is a stock that you are going to be keeping in your portfolio. This security is not something that you are going to hold for a short time and then sell. Therefore it is important that you pick something that is not going to drastically fall in value.
A covered call strategy has been employed for years by large mutual funds and exchange traded funds in order to benefit their clients. Now you too can do the same thing with your own portfolio. This style of investment is going to be safe because there is little downside and a relatively consistent upside. As long as you put the correct sale price in when you sell your call then you will not have a problem.
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