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Welcome to Covered Call Writing!
Covered Call Writing
Is Covered Call Writing For Me? When dealing with the stock market understanding the terminology is the single most important thing you need to learn. Nothing could be worse that exercising an option only to realize two tons of soybeans have been delivered to your door. If you are new to investing, the first term you need to become familiar with is an option.
Stock options are a way for investors to speculate without having to pay full price for a particular stock. This allows the investor to get their feet wet with limited risk. The buyer is simply entering into a contract that if the price of a particular stock hits a certain point by a certain date, then they can buy the stock.
The best part of this strategy is that if the stock does not meet the agreed upon price the buyer is under no obligation to buy anything and they are only out the premium. Also the buyer does not have to exercise that option and only loses the premium.
A Covered Call is a way for the owner of stock to create income from a stock regardless of what the market does. In its simplest form the stock market is a place you buy stock at a fixed price, and then sell it when the price goes up. This is how the stock market works, and of course if the price goes down, you sell and lose money.
The problem is that not all stock goes up or down in price enough to generate a profit. If you buy what is considered a strong stock or stock in a very established company, the price each month may not vary any. Covered calling allows an investor to generate Covered Call Funds from stock no matter what the market does.
Imagine making money every month from stock that is just sitting there not doing much, what a beautiful idea. Investors should always be looking for a way to generate income, and using a stock they already own, with limited risk is just what the doctor ordered.
Learning how a covered call works is not difficult even for the inexperienced investor, and since the buyer does not have to exercise their option, there is limited risk for everyone involved. There may be no other single Covered Call Strategy than writing covered calls to generate income, no matter what the market does. Writing covered calls can take you from a gambler to a real investor simply by learning how to use this strategy.
So stop sitting around wishing you could make money in the stock market. Learn about writing covered calls, and find out what you have been missing. For the low price of reading and learning you can start generating income today.