The motivation to earn profits from stocks
has led many investors to write covered calls. Covered call options enable investors and traders to collect
premiums in exchange for potential profits on stocks. In this arrangement, the
stockholder is paid for the call option that may be exercised by the buyer
after an expiration period. Buyers often find call options online by using a covered call screener. There are
several instances when an investor will find writing call options a practical
investment approach.
Writing covered calls is best done when the
market is flat or when the prices of stocks are not moving. Investors who write
covered calls do so when they anticipate that the value of their stocks will
not go rise tremendously in the near future. Instead of just holding on to
their stocks and risking little to no earnings, these cunning investors write
call options and earn extra money from the premiums they collect from the call
option buyers. The call option writers also think that the value of the stocks
they have will not increase significantly, thus the call option buyers won’t be
interested at all in exercising the call option once the expiration date sets
in.
Covered call writing is generally practiced
by stockholders when the markets are flat, as there is little chance that stock
prices will skyrocket. However, covered call writing can also produce the best
premiums when the prices of stocks are volatile, as buyers are looking to
purchase stocks that are projected to increase in value in the subsequent days.
Some investors are able to earn a constant
flow of income just by writing covered calls. These investors are able to earn
extra through the premiums they collect from covered call buyers and they are
able to keep their shares of stocks when the call buyers do not proceed with
the option if the prices of the stocks remain flat or low. The only problem
that investors have when writing covered calls is the risk that they are giving
away their rights to shares of stocks that may eventually become valuable in
the future. This is particularly true when the prices of the stocks that were
entered into covered calls and then called away suddenly rise.
Covered call options may be a
low-risk investment strategy for most investors, but there are still inherent
downsides to it. Traders who are looking to engage in this type of investment
should be aided by a quality covered
call screener to help them look for the best deal in the market. Barchart
is home to one of the best screeners available today. Visit barchart.com to
sign up for a free trial.
Mr. Brian Roy enjoys an active and
fulfilling life that is largely supported with his successful investments. Brian prefers to blog and write amateur
articles that help others to make sense of the stock market and he often refers
to Barchart.com to obtain
information from a reliable source.
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