Writing a covered call consists of the sale of an option call
while simultaneously owning the underlying stock. What this means is that you
(the investor) buy a stock and then agree to sell the stock to someone else at
a specified price (Strike Price). In
return for the right to buy the stock at a set price, the person buying the
option pays a premium to the investor (option price). Options
are traded on five different exchanges and expire on the third Friday of each
month.
Many covered call writers earn between a 7% and 15% return on their investment each
month, while also gaining downside protection should the stock price fall.
Also, instead of buying a stock and waiting for it to move, investors are able
to buy a stock and take their profit "up front." By compounding returns monthly instead of
annually, investors may experience accelerated growth of their principal
investment. Click here to see a
chart of how your money can grow.
For example, an investor may purchase 100 shares of Oracle (NASDAQ: ORCL) for $48 a
share, and agree to sell it for $50 on the third Friday of the following month
(strike date). The Investor might receive $4 per share for this agreement.
Here's the math: 100 shares are purchased for $48 per share, for a total of
$4800. The investor receives back $400 (100 shares x $4 per share). The
immediate return on this investment is 8.3% (Return =
Income/Investment). If the stock price is above $50 a share on the strike date
the investor receives another $2 per share for a total of $200 ($50-$48=$2, $2
x 100 shares = $200). The return on the investment is now 12.5%
($600/$4800) and a total of $600. Click here
for more info on how to write covered calls.
Winning Investments.com provides six different types of covered call tables including
selections under $25 and potential stock split candidates. One of the biggest
mistakes made when investing in covered calls is to focus strictly on the
return and not on the underlying stock. This is not our strategy.
Our research staff consists of two teams of experienced investors.
These teams conduct independent research on
the market, and produce a list of potential covered calls.
Then, the teams meet to review their
potential selections together, and ultimately must agree on all selections that
are published on our site.
This approach is designed to select quality covered calls that will produce steady
monthly profits, and limit as much downside risk as possible.
If you are already a member, Click
Here to view our latest covered call selections. Otherwise, Click Here for a free ten-day membership.
We provide covered call selections with
different risk levels. Our Stocks Under $25, and Stocks over $25 are what
we call standard risk. Our Stock split
selections are for investors who want out of the money calls with growth
potential. Our 13/13 selections are
conservative calls on companies with great financial strength, and our Deep in
the Money calls offer substantial downside protection. Click Here for a description of our covered call
categories.
Introduction
