Why Are Covered Calls So Popular?

Covered calls can be a very profitable strategy. That has made it one of the most used strategies in the stock market for both traders and investors. But what does it offer that makes it such a workable approach?

1. Money Now

You make money the second you enter a covered calls trade. It is instant return. It can get hard to just wait for the long term and to hold onto a belief that when all is said and done you are going to have more money now then you started with.
And while holding onto a stock for 20 years or so has shown that you are likely to be profitable, there are still no guarantees. Sometimes making a profit now can be a lot nicer than just holding onto blind hope.

2. Cash flow

Selling calls month after month can add up and give you a nice little cash flow. That is definitely something that should not be overlooked if you want to eventually make a living off of your investment. Cash flow is King, and selling options is a way to get it.

3. Low Risk

What do you risk by selling a call on a stock that you already own? You risk the stock going down, but you where already risking that by simply buying the equity.
The only additional risk you take on is the risk of not making as much.

If you sell a call at a given strike price and the stock goes up above that price you would lose some of the potential profits, but it could still be profitable.

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

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