Selling Options On Your Stock

One way to increase your returns in the stock market is to sell options n stocks that you already own. This can also give you another way to receive a monthly income from your positions.

When you sell a call you receive money up front. The only downside is that you give someone else the ability to buy the stock from you at a given price in the near future.

The great thing about this strategy is your ability to make consistent money. By selling calls month after month you can drastically increase your ability to profit from a stock as well as lower the amount of money you need to retire, which is always a good thing.

But there is a downside to this strategy. If you sell a call and the stock suddenly jumps you are going to miss out on some profits. There have been many times where I sold an at the money call on my stock and it went up 50% in one month causing me to miss that profit and sell my stock at a lower price. I didn’t lose money, but I didn’t make as much as I could have.

That is why this strategy may not be suited for stocks that you believe will make a large upward move in the short term. If you think you can make more money on stock then the option, don’t sell the option.

All and all this is a pretty important strategy and can allow you to drastically increase your profit.

For more on selling puts and covered calls visit http://www.stocks-simplified.com/selling_puts.html

For times to avoid selling covered calls visit http://www.stocks-simplified.com/Selling_covered_calls.html