Selling Covered Calls Has its Advantages

One great strategy is selling covered calls. This strategy is pretty simple, but sometimes the simple strategy is the best.
When you sell a call on a stock that you already own, you are giving someone else the right to buy that stock from you at a given strike price. For this right you are given a set amount of money based off of different factors such as, time until expiration, volume, and the strike price.
The major disadvantage of this strategy is that is severely limits your possible gain. But it does have its advantages.

1. You Get Money Up Front

There aren’t many investment strategies out there that allow you to make money up front without the asset even having to appreciate. This makes covered call selling such a profitable strategy. You are guaranteed to walk away with that premium. The only way you can either break even or lose is if the stock goes down too much.

2. Easy to Manage

It is an easy trade to manage. You can simply sell the call and come back in a month (or whenever it expires) and see what happened. You do not have to sit at the computer and make targets and stop loss orders, you just wait for the put to expire. That is pretty simple.

3. Most Stocks Have Options

Most stocks have some sort of option on them. This means that if you have a long term portfolio of a group of fundamentally strong stocks chances are that some of them will be optionable. So you might be able to sell calls on your long term stocks to increase the profit you make from them.

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

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