Best Covered Call

A covered call is an investment strategy that has to do with options. Options are a type of derivatives alongside futures contracts, forward contracts, swaps and benchmarks. Like all derivatives, they must have an underlying asset. Most common option underlying assets are stocks, in which case the options are stock options.

The attribute covered means the option is safe simply because one already own its underlying stock. This is opposed to naked calls, where the underlying stock is absent. Options can be of two types: call and put. Covered calls deal only with call options, which are rights sold to somebody against a premium. These rights entitle him or her to buy your stock at a pre-determined strike price. These rights may or may not be exercised within the agreed upon time period of the option, or at its end. The determining factor is stock value fluctuation.

If stock goes up, its value exceeding the strike price, the option buyer will exercise it, forcing you to sell your stock. In all other situations, the option will expire unexercised and you are left with the option premium as an income.

Best covered calls are designated depending on your outlook on the market. To begin with, you need to know the company that issued the underlying stock. You should avoid writing options for stock that is about to pay earnings before the expiration of the option, because that stock will likely appreciate a lot and you will end up selling expensive stock for little. Moreover, it is preferable to write short-term options, because this way you can reap more premiums for the same stock.

You can learn about getting stock options and the best covered calls to work for you through the use of the support from the Born to Sell website.