How to Write Covered Calls

Covered call writing is one of the best strategies in the stock market. It allows you to make a monthly income while at the same time not having to spend too much time at the computer adjusting and planning trades. To create a covered call you only need to do the following. 1. Find a Stock The first step is to find a stock that is both fundamentally and technically strong. It should meet all of the criteria that you consider a good long term stock. Make sure that this stock has options for you to be able to sell, some stocks do not offer options due to lack of trading volume. 2. Buy The Stock Of course you don’t want to sell a naked call so the next step is to buy the stock. Once you have the stock then you can start to look for which option you want to sell on the stock. 3. Find the strike price The next step is to find out which strike price you want to sell. If you sell a far out of the money call then you will be more likely to not get called out of the stock and keep more of the profit should the stock make a big move, but you also receive less premium. If you sell an at the money option or in the money your chances of being callout skyrocket, but your premium is much greater. 4. Sell the call Of course once you find a call to sell your last step is to sell it and then let the trade go. You might also want to create some sort of exit plan in case the stock falls. This way instead of panicking you have some idea of what to do. For more on covered call writing and other spread strategies visit http://www.stocks-simplified.com/Option_Spreads.html