Covered Call Options Strategy (Best Guide w/ Examples)

[@david1137444]

I have 100 T shares. I never traded options before. I would like to sell them as a covered call strike price above purchase price. Is this a Sell to Open or Sell to Close?

[@olutoyin7602]

As always, your illustrations are on point. The only question I have is why sell OTM calls if you can collect more premium from selling ITM. Can you please explain this? What’s the pros and con of selling ITM calls - no one talks about this.

[@jesusramos778]

If you sell an ITM call it means you're making a commitment to sell your stocks at a lower price than you bought them for. IE you bought a stock for $100 and you sell the $90 call, that means that even if you receive more premium, you will have to sell your stocks at $10 lower. Also this option is in the money since the beginning and technically it can be exercised at any time. The only reason you would sell a call in the money would be if you really think the stock will go well below $90 and it does, but it's basically gambling. It is preferable getting less premium but you eliminate the risk of losing on your stocks.

[@wei-liheng7780]

Hi thanks for this - question with Example Trade #2 graph: it shows that the strike price was met at about day 49 to expiration. Does this close the call option and your 100 shares gets traded away? Or is trigger the price right at the end of the expiration date as to whether it met the strike price or not, then the option closes and shares get sold? Thanks. Wei

[@jean-paularnaud1731]

Question: what will be the advantage/risk to sell OTM cash covered LEAP puts? You collect a large amount of cash, your collateral is proportionally lower than options that have less time to expiration. You will be less exposed to volatility and you can rollover your position many times. Any comment ?

[@revosail]

Best video on covered calls. I've watched several and you have the best explanation. Great job and much thanks.

[@SafarWIP]

8:28 but you gain the premium on the short call you sold? of course if the underlying goes to 0 that wont be much reliefe:)

[@TheRottenwaffle]

I've started covered calling my long term dividend producing stocks as a bit of extra juice for my squeeze... is there a generally better time frame / standard deviation price to put my calls at assuming I'm generally wanting to hold shares? I've done only week long calls so far, maybe longer are better? Thanks

[@jibvibesTv]

Thank you so much! This video is old and I’m still gaining FREE knowledge

[@projectfinance]

Thanks for watching! I appreciate it.

[@ScottiMac0007]

Hi Chris, I've been watching through your video library and haven't seen this addressed yet. When owning a stock for the long run (bullish) and selling a covered calls for increased income, at what point do you exit a trade and roll to the next? Example... Purchase Price $45, Strike Price $49, Current Price $43, 11 days till expiration. Sold covered call for $.45, Current Price $.08. I'm showing a 83% gain with 11 days until expiration. Should I roll to a later expiration, roll to a lower strike, or hope it expires worthless and realize another .08 cent of profit? It seems to me realizing the 83% gain now is a better risk reward than hoping to get the remaining 13%. Love the content on both channels!

[@davidharun8232]

When you sell the call option, where do you get the call option contract from? Can you just sell an option without owning it? Or you create (for free?)a whole new call option and then sell it?

[@ericmohler5609]

How did you calculate P/L of Covered Call examples as a function of days to expiration? Is that *just* Theta decay (t) for a Call?

[@shikhashersinghyadav475]

Another great Video. Thanks a bunch..

[@erikung4331]

Thank you for your time and experience!

[@bradar8669]

I dont understand covered calls I'm watching all these videos but can someone please explain this simply to me so if a stock is $75.00 I bought 100 shares so I spent $7,500 if I wright up a covered call and the call price is 3.00 then what I get 300 and lose $7,200 that's stupid I dont get it...please help me understand.

[@ScottiMac0007]

You would only lose the $7200 if the stock price went to $0. A lot of options expire worthless so you keep your shares and the option premium.

[@markherring3513]

How do I retain my shares? I want to do covered calls on boeing but i dont want to lose my shares....how do I do this?

[@projectfinance]

You have to buy back the short call before expiration. If you buy back the short call for a loss, you'll technically increase your average share cost because you'll need the stock price to go up a bit to recover your short call loss.

[@SafarWIP]

18:10 if you already have a 100 share then the covered call can profit you, not sure whay you say it is not a good idea

[@atanugg9372]

thanks, your presentation is simple but powerful on such complex subject.my doubt are Q1.From where I get the delta value of option strike price . Q2.which trends of underline stock price this strategy are mostly effective

[@projectfinance]

Thank you! 1) Modern brokerage software will have the ability to show the delta of each option when you're looking at the option chain. 2) For a covered call strategy, a steadily increasing stock price trend is optimal because with covered calls you want the stock to increase since you own shares. However, you're also short a call so you don't want the stock price to increase too fast, assuming you are trying to keep the shares and not have them get called away. Of course, it's impossible to predict steady bullish trends, but if you find a stock where you believe that will happen, a covered call can be a good strategy to implement as it gives you some downside protection if you're wrong. Hope this helps! -Chris

[@atanugg9372]

thanks, what are the best option strategies for hedging on downtrend market and also those videos available in your youtube channel;because,everytime my portfolio become negative on downtrend market , i can't protect my capital invested.

[@jayeshhdesai6677]

Very interesting learning tips for CFA I level students

[@feeltheburntv270]

I have a question so I bought 100 stocks of xyz @ 2.85 and then sold to open a contract at 1.00 call at a minimum 1.85/ share The stock has been down but I have been gaining money and I didn’t sell puts so I am confused can someone explained where I messed up because it was going negative when the stock was going up 🤦‍♂️

[@adnankazim88]

Did you figure this out lol

[@xxxzzz49]

Hi, thanks for your tutorial! I have a guestion, can I do covered call without 100 shares? Actually, I have already buy a call, and it still have over 600 days to expired, is it possible to use this contract instead of having 100 shares?

[@rockyou79]

Thanks very detailed explanation

[@projectfinance]

Thanks for watching!

[@dannytetreault]

I'm totally confused. If I understand this method correct, you are buying a short call. Why? I understand just buying calls. You do not on the underlying stock. You purchase a call at a strike price and hope that the underlying stock appreciation value. Why would you sell a call on the short basis.? I've heard of call option strategies that use the word 'naked' to describe their short position.

[@projectfinance]

Sorry for the confusion! It takes some time to grasp some options trading concepts. Stick with it! In the case of a covered call, an investor sells a call option against 100 shares of stock (which is why the short call is 'covered') because selling the call collects option premium without any added risk. There's no added risk because the investor owns 100 shares of stock, which means selling a call option does not carry the 'unlimited risk' of selling a naked call (selling a call without owning any shares). If a trader sells a call option with a strike price of $100 for $5 and the stock price goes to $200, the trader will have substantial losses because the call option will be worth at least $100 (a loss of at least $9,500 per short call). However, if the investor purchased 100 shares of stock at $95 and sold the 100 call for $5, the investor would have no losses if the stock went to $200 because they already own shares at $95/share which they are obligated to sell at $100/share via the short call option (if they're assigned or hold the short in-the-money call through expiration). So, the net P/L in the above scenario would be: Overall P/L: +$1,000 [($100 Sale Price - $95 Purchase Price - $5 Premium Collected) x 100 Shares] Of course, long stock investors usually don't want to lose their shares, which is why if they sell a call they will choose a strike price they believe the stock will not be above by expiration. For instance, if the stock is at $100 and the investor does not believe the stock will be above $110 at expiration in 30 days, they might sell the 110 call to collect some premium against their stock position. There's a lot of information above so please let me know if you have further questions! I'm happy to help. -Chris

[@jayeshhdesai6677]

Pls share your brochers if any

[@dannytetreault]

Why is there a short call noted above in the video? I thought doing a covered all involved just selling one covered call? My confusion stems from taking multiple courses from multiple teachers who call the same things differently.

[@projectfinance]

The covered call is the combination of 100 shares of long stock and a call option that is sold (a short call). When I say 'short' call, I am stating that the call option is sold. Does this clear things up?

[@dakotaroberts5737]

Awesome video! Thank you for the info.

[@projectfinance]

You got it! Thanks for watching/commenting!

[@tromboneJTS]

Wouldn't you sell your long position before it went to zero?

[@projectfinance]

Do you mean the shares of stock? In a perfect world, yes, you could sell your shares of stock before the stock price reached $0. However, there's no knowing when/if a stock/option price will reach $0, so it would only be clear after the fact (hindsight is 20/20).

[@shiyangzhao219]

thank you for sharing this

[@justinbowers7091]

How are covered call gains taxed?

[@projectfinance]

Hi Justin, It's safe to assume that all short-term option gains are taxed at the short-term capital gains rate. I would do some research to find the answer for your particular strategy/duration. Here's a link that might help: www.investopedia.com/articles/active-trading/053115/tax-treatment-call-put-options.asp I hope this helps! -Chris

[@colechaudoin5336]

Shouldn’t your max loss be (-So+C). Since you are able to lose all the money on your long position, but the buyer won’t exercise so you get your Call premium and nothing else.

[@projectfinance]

Hi Cole, The maximum loss for a covered call position is: Amount Paid for Shares - Amount Collected from Call You can lose 100% of your stock position's value if the share price goes to $0. But, if that happens, you'll make a 100% profit on the call that you sold. So if you bought 100 shares for $73.25 per share and sold the 75 call for $3.25, you would lose $7,325 if the stock price went to $0, but you'd make $325 from the call you sold. Your net loss would be $7,000.

[@davidsnoberger9984]

Y

[@paulhawkins779]

don't read show.

[@projectfinance]

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