What are the Advantages of Covered Call Writing?

Traders and stockholders have found different ways to maximize their earning potential while minimizing their risks. One of the more popular methods that traders utilize in the equity markets is covered call writing. Through covered calls, stockholders write a call option for a shares of stocks at an agreed price (also referred to as the strike price). The option buyer can exercise the option once the option date expires. Typically, option buyers do so when the price of the stock has become greater than the strike price.

Stockholders should have at least 100 shares of stocks to be able to write a call option.

In exchange for writing a call option, the call writer receives a premium. The beauty of this arrangement is that the call writer can keep the premium and the stock at the same time if the option buyer does not exercise the call option once the expiration date sets in. According to experts, selling stock options can earn a trader up to 60% or more a year. It is a normal practice for stockholders and traders to successively write call options on stocks, especially if they think that the value of the stocks will not increase significantly in the future. 

Aside from the extra income that traders receive from call options, they are also protected against losses in case the value of the stocks they own dip in the future. By entering into a call option, a stockholder can at least earn extra profit just in case the value of the stocks he or she owns slides in the future.

For instance, a stockholder writes an option for shares of stock ABC at a strike price of $40 per share. The call option expires after two months, with the stockholder earning around $5 per share from the call option. However, the stocks of ABC slide down to $30 per share, which means that the stockholder loses income opportunity. The stockholder can still look at the brighter side since he was able to earn some money by entering into a call option agreement. Likewise, the stockholder retains possession of the stocks because the call buyer won’t proceed with the call option given that the value of the stock has decreased.

Covered calls are considered to be low risk investment strategies yet like all other investment moves, it still has its risks. Stockholders and traders must study their options first before writing a covered call.  A call screener can help investors with their strategies. Visit barchart.com to learn more.

Read Original Story

Should You Write Covered Call Options?

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.

Read Original Story

The Benefits Associated with the Use of a Covered Call Screener

Investing in the equity market is not a walk in the park. Even the most experienced traders are susceptible to huge losses when the investment strategies they implement blow up in their faces. The volatile prices of stocks in the stock market can bring a stockholder success one day and terrible losses the next trading day. Traders create covered call options since they want to ensure their portfolios are not affected by decreases in stock prices. By entering a covered call contract, a trader earns a premium by selling his stock for a strike price and the trader still has a chance to keep the stock if the price of the stock drops further than the strike price after an agreed date lapses.

Thousands of stock traders enter into this type of agreement, which makes covered calls a very lucrative investment strategy with less risks. However, the sheer number of stocks that are entered into covered contracts makes it quite impossible to track down every stock in the equity markets. Traders who are shopping for stocks that are up for covered contracts will find it difficult to find stocks that are suited to their investment strategies – unless they use a call screener.

With a call screener, traders can easily sort through the covered stocks up for grabs in the market. They can filter data according to US equity symbols and sort information according to categories like weekly and monthly. They can also calculate how much their profits would be if the covered stock stays the same in price or if the price goes up. Similarly, users of call screeners can filter data by market capitalization, moneyness, and even upcoming earnings reports, which they can refer to when increasing their protection against falling stock prices.

Call screeners are premium products offered by websites like Barchart. These tools require users to subscribe and pay minimal monthly fees in order to enjoy the benefits and privileges offered by the screener. Considering that an investor’s earnings potential is at stake, subscribing to a call screener is certainly worth the money. There are several covered call screeners available on the Internet, such as the Barchart covered call screener. Aside from the aforementioned features of the screener, Barchart’s screener allows users to search for calls on the top traded stocks in the market. Users can also write covered call options with this service.  Interested subscribers should visit barchart.com for more information.

Brian Roy lives in Mesa, Arizona where he is a freelance web designer. His interests include web design, shopping, basketball, clubbing and the stock market. It is his latter interest that has made him a top authority about stock market tips and tricks, including finding the top stocks at authoritative websites like Barchart.

Read Original Story