Covered Calls are the Trading Cheat Code | How to Trade Covered Calls

[@InTheMoneyAdam]

*PLEASE NOTE* -TD Ameritrade has no assignment fees (yay!) -Traders selling covered calls typically repeatedly selling short-term OTM calls (1 week-1 month til expiration) -It is common to buy-to-close the call to roll it out to a later expiration or lower strike to collect more premium. -It is common to roll the call out even if it's ITM in hopes that it will become OTM with more time. However, this keeps your capital locked up in those 100 shares and you could miss out on more potential gains had you just bought right back in the next trading day after assignment. -It is common to sell a call below the average cost of the shares you own if you've been holding the shares for a while and haven't had capital gains yet. That's fine! Just make sure you're cool if the shares get called away at the strike. This will result in a realized loss from selling at a cheaper price than you paid, but the risk is the same: you miss out only on capital gains above the strike. You can always hop back in. -i love you

[@angburger784]

Thanks! -I love you more

[@reynerioguevara2990]

I can oly say thank you. I see $ signs every where. I hope I’m not just dreaming. I just watched the video 4x

[@averagejoey2000]

I love you too. I did a bit of research on the yield of Covered Calls on some ETFs

[@derekpelotte1378]

Can you briefly explain what you mean by roll out the call ?

[@InTheMoneyAdam]

Derek Pelotte it means buying-to-close the call you wrote while simultaneously selling-to-open a call with a later expiration. An example of when you might do this is when the call is so far OTM that it’s worth 0.01 in premium but still has some time until expiration. Is it worth waiting for it to expire before selling a new covered call just to collect that $1? Not really. It’s better to “roll” your call out by buying-to-close that call (paying the 0.01) and selling-to-open a call that’s less OTM and/or with a later expiration to start collecting more premium. I know this can be kinda confusing, LMK if you need more clarification.

[@felixf4378]

Just a few weeks ago "covered calls" sounded like calculus to me, but now it's all starting to make sense.

[@fiskenburg007]

F Fuentes Same here. Now I’m loving selling covered calls!

[@AltumNovo]

It's really simple just the language used to describe it is nonsensical

[@ladasodaexplains3355]

I understood calculus first then options 😂

[@desoztoppieter9895]

if you are too stupid to understand calculus you should stick to watching cartoons

[@dancer1]

An you help me?

[@mattshehata6840]

Dude, your channel is so amazing man. I’m a beginner trader scrambling all over the internet to try to understand strategies and to make more gains, and there’s no one else who makes this stuff so easy to understand. Simple, honest, and very knowledgeable. keep it up man!👍🏻

[@InTheMoneyAdam]

Thank you!

[@Joe-Bourbon]

Yes, I’ve watched several hours on options and was in a fog. I found this channel and things are finally starting to click.

[@basketballshots11]

are you still trading? still consider yourself a beginner?

[@obviouslymatt6452]

try optionalpha

[@jeremymeyer5552]

Inthemoney was my hero until he lost his mind on GME.

[@arthurt74]

Watched a few videos on covered calls and it was absolute gibberish. Spent 30 seconds watching the intro and understood it completely. You're an absolute legend. Thanks a ton! Selling covered calls is amazing.

[@jordanleo]

Same! I have never understood how covered calls work until now. This guy is the best at explaining on KZbin.

[@larryh.5101]

Don't forget that the shares can be exercised ANYTIME up to the Expiration Date. For example if dividends are announced you could get exercised before expiration.

[@johnsimmons302]

Shouts out to my guy making it simple

[@r.alexander9075]

This guy and kamikaze should work together

[@juanchaves6952]

I just sold my first covered call for 1/3 of a small position I have and it felt like stealing money. I wouldn’t mind keeping or selling the shares at that strike price

[@r.alexander9075]

@@juanchaves6952 which underlying did you own? I was thinking of doing something similar to SHLO since its cheap af lol

[@meinbherpieg4723]

Making it simple is just explaining it well.

[@r.alexander9075]

@@meinbherpieg4723 unless its simple to begin with, youd really have to try to make it sound hard

[@thomasrichardsoniii7188]

Great video Adam. I sift through a lot of finance videos on youtube being a millennial trader myself for about 5 years and I've gotta say this one is up there in quality. Easy to digest, practical, and there's no financial guru going on and on about some esoterically obscure (redundancy intended) subject, being somewhat vague and using complicated terms. Videos like this are what youtube and young people need to get their feet wet. Bravo.

[@InTheMoneyAdam]

Thank you my dude

[@OWG1969]

One of the best options videos I’ve seen so far. I’m constantly explaining this is friends who think they have to BUY calls and puts rather than sell them because that’s what the brokerages push. Most of them don’t realize there is a win-win side to the game (as long as you intended to complete the co tract originally and are comfortable with the strike price you choose) Bravo! Keep up the great vids!

[@lavellelee5734]

I'm a little lost, how is it win win?

[@bhawks]

I like to think of covered calls being a rent-to-own situation. The premium is the rent and the assignment is the purchase and if they decide to walk away you still have your house/car

[@TheBashar327]

Very good analogy!

[@alanmuther]

How often do you think one is assigned if the call expires ITM?

[@karltschonki6560]

@@alanmuther depends on the delta. If the option is priced correctly the delta id the probability % that the call goes ITM. So 0.3 delta = 30% or 0.7 delta = 70%

[@joegreen4959]

10:50 "These are our strikes, going up as they go down, because why make trading easy?" Cracked up on this one.

[@bhawks]

Glad I found Adam. Really turned my investing around. Instead of chasing straight stocks I've done much better with options learned 100% from Adam. Up 35% with 8 options trades all positive. Thanks brother

[@fkncompton7124]

How is your trading going 9 months later

[@Skuggi008]

No answer = hes broke :)

[@guapo2012]

Finally, someone that explains clearly how to trade covered calls

[@Elfaia]

I've been reading about options but goddamn having someone explaining with visuals just makes it so much easier to understand.

[@junkyard4022]

dude i was literally able to explain this to my friends right after this video because he explained it so well

[@omearxd]

Absolutely easiest explanation for covered call for new options trader, to the point, clear, no loud music, perfect thank.

[@itzLCo]

I’ve spent quarantine watching all your videos. My initial investment was low. Happy to say I’m up $500

[@anthonyfernandez7182]

what are your strategies? selling calls, buying them or wut?

[@x2dab184]

$50 for a pack of beer?... of course I'm gonna take advice from a guy with such expensive taste in beer.

[@anthonylosego]

It's one of those Coors 72 packs I'm sure!

[@logicuser8382]

x2dab184 I have never in my life bought a PACK OF BEER. LOL

[@SamuelAsherRivello]

Obviously he's a financial genius alien trying to pass as human. Thanks for the great videos.

[@JoeyDaBull]

@@logicuser8382 6 pack 12 pack 18 pack 30 pack.. yea their called packs.. i usually grab 12 pack or case.. LOL

[@tongvang724]

He has a lot of friends that he drinks with. Not just by himself, dumbos

[@MorphingReality]

There are a lot of bad actors in this space, based on what I've seen so far, you're not one of them, good on you for recommending the educational stuff :)

[@dankcastle9092]

I’m a fairly new investor...I totally understand this strategy. I made $4k in premiums this months. Thank you!!

[@Painfulwhale360]

Great job! I watched this video and it clicked for me.. so the next morning I told my dad about this and he sold 13 contracts and made about $7,000. All of this in about 30 minutes time.

[@DaddyCaldwell]

I’ve literally just started trading around a month ago Invested $700 and lost $100 my first 2 weeks. Just buying shares and letting it sit. Hopped on KZbin and discovered you and some other channels and learned about options and different strategies. I’m up to $3000 after a week. I can’t wait for Monday’s now!

[@FmTrini]

TR P that’s a fact he just got lucky I know a guy who’s account went from 13k to 2k in a couple of days trading options gotta be vary careful lol

[@squibman]

TR P do you only do covered calls now. Or how do you decide what to buy and when? Don’t wanna be a r/wallstreetsbets kid

[@marksilva1588]

If u holding appreciated shares for less than one year and you sell a call against those appreciated shares that exceeds strike and is exercised you will not be happy with the tax result of that strategy because you would have triggered short term capital gain of an appreciated stock. Better to use selling calls secured by stock that you have held for more than one year if that stock appreciated after initial purchase.

[@gabrielrcortina]

Dude, this is pure gold. Awesome video. I had exercised two call options of PLUG at $4 each about two weeks ago, and I was going to buy a put to sell the 200 shares accumulated. I would have gotten less than 100 bucks for that, but this video showed up in my feed, and if my $4.50 call sale gets exercised, that would be awesome. I shared this video and your other beginner videos with my family. They're so simplified. I can't thank you enough but thank you so much for making videos. Keep doing what you're doing.

[@Mildgreenwow]

Hows that $4.50 sell price today? :P Ill still buy them for $4.50 each if you wanna sell.

[@paulsaltine]

@@Mildgreenwow Still buying for $4.50 each? I have some if you wanna buy.

[@okitsalex]

Make sure you're setting the strike price to a price you're comfortable with. I ended up losing big profits, because I was focused on the premium rather than the strike price I was okay with selling the shares. You're also effectively locked into that share until the expiration or purchase of the contract. So if you wanted to move your money around, by selling your shares, you can't until your contract is resolved. IMO these are the two biggest draw backs.

[@Nick-xo5mm]

8 hours of KZbin University later, I’m ready to make my first trade

[@beedt714]

Get NIO

[@Nick-xo5mm]

Bee Dt714 done

[@DeathrashWhiplash]

Get NKLA

[@figment7682]

Only 8?

[@DeathrashWhiplash]

Get hive

[@jimsherod8786]

I appreciate your sharing your insights on options trading. You have a clear presentation and get to the heart of it without a lot of extra info. After watching your videos, and watching some others who share their expertise on options, I've successfully traded a number of covered calls this spring and summer. You're so right... if you don't get greedy and set your strike price to make a profit if you get assigned, then you really can't lose (except possibly missing out on potential upside movement of the underlying stock). Selling covered calls to exit a position is so sweet - getting paid a high premium usually for doing something you want to do. And, you have covered "the wheel" trading strategy of cycling through selling covered calls and then taking the money received from being assigned and selling cash secured puts in other videos. And I love the cool feeling of lowering my cost basis and walking away with the premium when the covered call expires worthless. Rolling the call is something I haven't had to do yet, but that is also a great thing to know that you've covered in other videos. Thanks so much for your teaching us all.

[@BD-np6bv]

Scott is right. You CAN lose. Here's what I replied with on another person asking how they can lose: You can lose in three ways: 1. You sold an extremely low strike call for pathetically low premium. For example, the stock is $50 and you sell a $20 strike for $20 dollars. Your chances of getting assigned are VERY high, almost a certainty unless the stock crashes below $20. That means WHEN you get assigned, you'll only gain $20 from the premium and then the stock gets sold for $20. You'll lose $10 difference ($20 strike price - $50 share cost + $20 premium sold) = -$10. That means you end up with only $40 ($50-$10). You've lost 1 - ($40/$50) = 20%!!!! This is by far the worst newbie mistake you can make, to sell covered calls at lower strikes than you paid your shares for. 2. You sell the covered call (any strike really), especially extremely far out calls like a year from now, and then the stock tanks because of accounting fraud or some other extremely bad news like short sellers saying the company is a fraud after hours with the stock down -10%. Well, your covered calls prevent you from selling your stock after hours, as your stock is used as collateral, so all you can do is watch in horror, pray and pump the stock on forums with the intent of dumping the stock the next day. The stock could go down even more -70% the next day, and for the next year -90%, and all you got in your name is a massive stock loss + some covered call premiums. You'd have to buy back the covered calls (at least for some little profit because the calls will be worth less due to the tankage), and then sell your stock. So in a sense, selling covered calls in this case is still a little better, but you couldn't get out in extended hours because of the covered calls. 3. You sold some covered calls a little higher, and got some premium for it. The stock rallies big time on WBS apes or some pump and dump fake news, and you panic, and buy back the covered call for A LOT more money, like 300% more than you got paid for. But you get greedy and don't sell your shares. Then, pump is over and dump commences (hence pump and dump) and the stock drops back down. You've now lost money on that covered call by buying it back for A LOT more money. If the stock keeps tanking, and then you panic sell, you'd then have two losses: From buying back the covered call for MORE than you paid for AND selling the stock at a loss for LESS than you paid for. Also, if you planned to keep the stock for over a year, for long term capital gains, well, if you get assigned, say good bye to that. You now owe taxes if you got some gain. And taxes kill growth returns. Bottom line, if you sell covered calls, you had better know what you're doing, have an exit strategy, AND learn how to read charts and do your homework on your stock positions. I teach all my Twitter followers about learning how to read charts as the MOST critical skill you can have.

[@DanySimpleTrades123]

Didn't understand this at 1st till I experience it myself. Came back and makes all the sense in the world. This shit is a win win

[@joshfatal]

Every time I open Think or Swim, I get this feeling that I'm playing EVE Online.

[@dinaray2025]

Lol 😆

[@kylebutler51]

As a guy with 20 minutes of Eve playtime on someone else's PC, I concur.

[@TheRandomDave]

docking permission requested

[@devenp2069]

As a novus investor, you helped me understand a better strategy for exiting a position instead of simply selling it. This video, along with comments, makes me realize I have so much to learn as it seems like there are so many ways to trade. Will be on a binge watch. Earned a sub!

[@kY0nge]

I've been learning my ass off about options just to get to the point of me being able to understand covered calls. It feels like once you get 100 shares of a stock, this is the way to go to get some steady income.

[@tonyh1718]

It is, unless you think you have a ultra hot growth stock and think its better to let the stock go up

[@Painfulwhale360]

@@tonyh1718 yeah but if the stock is hot growth and your shares get called away you could just rebuy them same stock once it dips again and rinse and repeat

[@bennyakundi2159]

If it’s super in the money then once you sell the shares and get your premium, it probably won’t be enough to buy back 100 more

[@barbaroacosta5335]

@@tonyh1718 agree. Do it with solid stocks, but if you love it don't sell calls against it.

[@ggod4185]

so when selling a call I should never bet that it won't go down

[@anujanshankaran8577]

Whenever I explain things, I put it accross on the basis that the other person dosen't understand anything. This Dude has explained it in a similar way. Also he has focussed on the point most people are looking for, that you will make money on Selling Covered Calls as long as the strike price > than your basis.

[@jcflyfishing5097]

I'm an idiot. Im completely new to options trading and was trying to write covered calls, so naturally I selected the "covered stock" spread after purchasing 100 shares of a company, and hit send thinking I was making 157$ premium on my covered call. Immediately my shares disappeared from my account, and I ended up loosing money. Now I know to just have the spread on single, and sell calls that way. I really appreciate what you're doing, you make great videos and have answered more questions for me than even think or swims education has.

[@derekjohnson3954]

Really appreciate the quality of video production and straight forward approach, not enough you tubers like you in the finance space

[@cadehicks8273]

You should do a video on technical analysis for beginners. Your option trading for beginners is what got me into options, and I know you would be best at breaking down what everything means in a simple way.

[@pauldacus4590]

7:38 This graph shows that selling covered calls is the equivalent of selling puts. I've heard that Warren Buffett actually sells puts when he is OK with being assigned the stock anyway. I read a "academic" paper a long time ago that looked at a lot of "dumb" stock & option strategies, and selling ATM puts was the one that consistently made above average returns over the very long term. I sell short dated calls against my stocks for general income or as an alternative to selling the stock outright.

[@SuperAspergersMan]

Honestly one of the best videos that explain how to do a covered call. Most people jerk you around on KZbin and they don't really explain it so that you can understand. I like the poker chip analogy. Great video

[@glennpells9712]

This man is the best at explaining options. Great job.

[@TopJoo7]

So a covered call is similar to assigning yourself dividends given the condition that the price stays below the strike. What an interesting way to profit!

[@tastyaloha8175]

I was somewhat confused in simplifying what i was watching. Thanks to your comment things were put in perspective lol

[@retirewithoptions2913]

Soon you will no longer care about the dividend. The option premium will outpace dividend yield by a long shot.

[@tastyaloha8175]

@@retirewithoptions2913 thanks learning more every day

[@WheatBread006]

Yes, but I recommend looking into selling cash-secured puts. It is a better strategy IMO (than covered call writing). Now, if you’ve made a killing on a stock and you want to trim some, then use a covered call and at least collect that premium. Just don’t be upset when they call some (or all) of your shares away.

[@tastyaloha8175]

@@WheatBread006 thanks bro! Ill research more cash secured puts to better understand. If you have any sources you reccomend please let me know:)

[@TheStallion234]

I also like the idea of buying to close once the premium decreases by 75+%. When you do this, you pay 25% of what you originally paid, but you can sell a new contract right away, often making more within a similar time frame than if you let the call expire and keeping that 25%.

[@blocboyy4465]

This

[@kenjiedavis5238]

I'm a little bolder. I set my BTC positions at $1 ($.01/share)

[@Sean-xu5ti]

I just want to say thank you. You’ve taught me more in 3 days then most guys in months. So straight forward and love that you don’t repeat yourself (like I am now, ha). I love that you don’t pad the video for time!!! Thank you so much!!!

[@timothyyoung980]

Truuuuuuu

[@uhmillyunaire]

you are hands down the best options teacher bro you make it so simple for noobs!

[@uniquesongs4244]

Wonderful Video..I have looked all over KZbin but this is the only video that explains everything! Thanks so much.👍

[@G33KST4R]

Just traded a covered call on AMC. Long term idk if there's much life left in them since they were trading lower, even before the outbreak, but in the short term the stock is going to skyrocket once states start lifting quarantine orders. In the mean time, I'll be happily collecting premium.

[@friskyisfat]

Except that has an underlying that could very well go to $0. This strategy doesn't mean shit if you have no faith in your underlying long-term, as this is essentially a way of making extra tendies while going long on a stock.

[@journeyblue5256]

@@friskyisfat I would bet money that you hang out on WSB.

[@jimsherod8786]

Great explanation. I haven't ever placed a covered call, but I'm getting my courage up to do it with some shares that I already own and the stock has been really stagnant. This looks like an ideal way to make some cash and hopefully I won't get assigned (since I like the stock). But if I do then it will be for a profit, so that is a win/win. As you say, you have to pick a strike price one is comfortable with for selling the stock in case you get assigned. I like your style of presenting.

[@PossumLint_1927]

This is hotter than any vid on PH

[@HighOnTheSound]

This dude is the BEST options teacher on YT.

[@ergonautilus]

How do you choose expiration date? What is more consistently safe/profitable: a week out, a month out, a year out?

[@vanagooniesadventures5177]

Is it safe to say a covered call is like setting a limit order and getting paid to set it? If the limit gets met, the shares are sold. If the limit does not get met, you still own them long and you made a few bucks for offering the limit price?

[@deathbymonkeys]

yes this is waht it means!

[@sastra.schrnz]

Yes, but the limit has an expiry date

[@FrankenTruck]

Basically. That's how I use it anyway. Same for selling puts...I treat them like long term limit buy orders.

[@OWG1969]

In a weird kinda way yes. That’s one of the two ways I use them. (The other as a tool to reduce cost basis)

[@sastra.schrnz]

The Moon unaware of Dawn buy more 🚀

[@ChartAction]

I tried my first covered call the other day. SNDL on Friday I bought it at 1.15 and did a strike price of 1.50 with .8 premium. I think it hit 3$ or something so I lost out and didnt gain that much. However I think I learned a ton from just that one trade. I think this covered call stuff is my kind of thing just seems like it takes a lot of capitol to do it

[@ChaceBonanno]

The hidden cost is the opportunity cost, the price appreciation that you miss out on when the underlying stock moves above your strike price.

[@storiesreadaloud5635]

The hidden cost is when the shares simply go down in value. Now you're writing calls on a much lower value and previous earnings from your calls have been wiped out by the loss in value of the underlying asset.

[@Mandinka711]

@@storiesreadaloud5635 If they are covered calls don't the options just expire leaving you with the premium, and the shares ? Are you saying that if you had AMD at $80, strike of $85 and the price fell to say, $70. You would keep the premium but as the value was now $70 it would command lower premiums for any future covered calls ? Is that what you were saying ? Because, when you said "now you are writing calls on a much lower value" sort of implied you "had to" keep writing calls. Like you were somehow bound to doing it. Thanks, if you can explain it a bit further :-)

[@storiesreadaloud5635]

@@Mandinka711 yes, that's what I meant. That's the risk - the shares go down, and if you want to do more covered calls then they might get called away at a lower price than you originally paid. You're right, you're not obliged to take that risk, but then you've lost your income while you wait for the shares to recover, which they might never do of course.

[@X11CHASE]

@@storiesreadaloud5635 that’s why it’s safer to write covered calls that are likely to expire, but also ideally for a set of shares that you have a a very low cost basis on, relative to current market value. You definitely don’t wanna risk assignment by chasing high premiums, on shares that could easily go into the red any time soon P/L wise

[@kellyinterrante3884]

This is so well done, thank you. If someone wants to keep shares they can purchase more than 100 and only sell a call on 100 and keep the rest. One can also buy a put on these same shares in case the price really drops. Lots of options, pun untended.

[@seanflynn781]

This two year old video corrected my thinking. I'm selling covered calls right now, but not below my cost basis.

[@RedLeader327]

This makes so much sense! Going to start writing AMC covered calls. Will continue to hodl, of course

[@LANDSHARKK]

Sold covered amc call $85 strike for this Friday. Credited $4,370 . so if it doesn't hit $85 in 2 days I keep my shares and the credit. Bought 100 more shares of AMC with the credit😅

[@RedLeader327]

@@LANDSHARKK HOLY WHOA!!! And here I am happy to have written a single covered call at a $60 strike. 😅

[@ethanmuxlow6958]

@@LANDSHARKK it’s so unlikely it’ll hit 85, they credit that much??

[@LANDSHARKK]

@@ethanmuxlow6958 no, I am retarded.

[@BD-np6bv]

@@scottreesetradinginvesting7936 AMC will have to go bankrupt in about 1.5 years if apes won't let them sell shares. Their interest expenses alone are horrendous each quarter. The coronavirus is here to stay and will mutate into deadlier variants with each infection. On the other hand, if apes let them sell shares, they'll keep getting diluted to nothing. Bottom line is AMC can't make enough profit to cover for their debt. It doesn't matter how much apes buy the stock because if AMC can't make a profit and can't sell shares, they WILL have to downsize and sell off assets, or go bankrupt.

[@gigawattss]

BRO, YOU RED MY MIND.Yesterday I was watching your old video about this covered calls

[@CarlosRodriguez-eg1ic]

Dude thank you for teaching me this. I was not able to understand it for the longest.

[@mrbard1]

I watched half this video 1 year ago today and it was like a differnt languge in a differnt universe. But now i watched again for the full length and i completely get it.

[@thebookbro5150]

Wow, I didn't understand covered calls until I watched this video. Thanks a ton!

[@Kappachino]

It's a hard concept for people to wrap their heads around but I thought you did a good job! Also I see your production value improving (intro, sound effects) :)

[@InTheMoneyAdam]

Thanks my man!

[@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 🤦‍♂️

[@InTheMoneyAdam]

@@feeltheburntv270 When you sell a call, you make money on that position when the stock goes down. You're not buying a call which would make you bullish on the underlying, you're selling. If the stock goes down, then, you will incur an unrealized profit. If the stock price goes up, you will incur an unrealized loss. But if you do not buy-to-close, then that loss is not realistic because it will expire and you'll either be assigned (if it expires ITM) selling your 100 shares at the strike and keeping the premium, or you won't be assigned (if it expires OTM) and you'll keep your shares and the premium. Selling a call results in the exact opposite position of buying a call.

[@Max-tg5in]

The key thing here is not freaking out when your short position goes in the money. It will show as a loss (a big one if it's far ITM), but it will settle by expiration to only have Intrinsic value; which is a gain overall if your set up is correct. That was my first mistake trading with CC's.

[@Samsonight33]

Can you further explain

[@Max-tg5in]

@@Samsonight33 it means as long as you sell the covered call above your cost then you literally can't lose money if the stock goes beyond your covered call price. You'll only be "losing" out on further gains

[@investoengineer3811]

Max, does one need to keep cash margin if it goes ITM even through one is holding shares in account

[@Max-tg5in]

@@investoengineer3811 not if you sold the covered call above your average cost of the 100 shares you put up as collateral. Ex. You bought 100 shares at $9 and sold a $11 covered call. The stock moons and is trading at $15 at the time your CC expires. Your covered call would show a loss of $400 at expiration, but your shares would be showing a total gain of $600. So overall you have a $200 gain. Again, if you set the trade up correctly like in my example you shouldn't be in risk of any margin call

[@investoengineer3811]

@@Max-tg5in thank you Max for explaining

[@methospayne4735]

I developed a entire strategy around selling coverd calls purchased with margin backed by ETFs lol it literally wins every time I've been convinced it's a impossible loose strategy coverd calls are the most op thing in the market it's amazing don't trade inside the market make the market and collect rent amazing keep preaching bro people gotta know about this shit

[@illwill5215]

One thing people dont tell you is you gotta make sure your premium adds up to more than what you bought the stock for or else you'll do all that for no profit at all or very little. Especially on cheap stocks that pay little to no premium

[@jong3122]

This helped a ton. I had a pretty rough idea of what covered calls are and what they entail, but this video broke it down to me so I know have much better grasp of what's going on. Thanks!

[@markjszymanski]

This is amazing. Every other video makes this so overly complicated

[@hanshearth7745]

Can our King tell us how he got started? His book recommendations. I am learning so much!!

[@craig_percoco]

Great video brotha. What software were you using to do the drawings? Thank you

[@InTheMoneyAdam]

Photoshop and a Huion H950p tablet

[@MikeyBadabingBadaboom]

This guy is the absolute best stock market educator on KZbin. I'd be down to learn more over a friendly cold beer.

[@denizc3318]

this is the best explanation of covered calls I've seen on internet so far

[@livedeliciously]

This strategy is brilliant if you're holding stocks for the long term. You literally just sell OTM calls with a shorter expiry and just rinse and repeat.

[@ChampangeSuperNovaz]

i don't really want to sell so is writing a call for only weekly $1-2 premium ok?

[@livedeliciously]

​@@ChampangeSuperNovaz If your goal is not to get assigned, I wouldn't use premiums as a gauge for what to sell. The premiums will vary depending on DTE, IV, and news reports too. $1-2 premiums on OTM weeklys are possible when IV is super high (look at NIO right now). It's better to use delta as that is a rough indicator of probability. If you do decide to sell on NIO just beware, that shit is going absolutely crazy.

[@ChaceBonanno]

Seems like it. Until you're assigned, forced to sell your shares, and the stock quickly keeps moving up. If you don't get back in quick enough, you'll miss out on some upside.

[@Andrembramwell]

i understand but am a bit confused . If I buy an OTM option and sell an OTM option at $1 to collect $100 and the premium goes up say $10 it will say I am down $1000 but he says not to panic so if it expires in the money what happens? Am I down the difference in the premium $1000 + the cost of 100 shares? What happens to the option if it gets assigned when ITM? Does it withdraw the strike price i executed the sale at x 100?

[@jacklarson6281]

nice even keeled level headed explanation. most of the tutorial vids out there on trading are hyped up and full of bravado. or they are trying to hook you into buying their "Seminar" good job, you got a new subber. :-D

[@PhilSoussanOfficial]

If they go ITM you can still roll then out month to month. You can even go out further to raise the strike. Sometimes done this for a year and reduced the cb of the underlying to 50%. Just do it when IV is high for the relevant series and time value is at a premium. If you get called then just reverse the trade - if you want!

[@alexmccain2390]

The best covered calls video on KZbin and I’ve been through 10-20 of em.

[@stamatouvable]

I wish I watched this first when I started learning options. Would have saved me a lot of head bashing

[@ddocksta]

This is my FAVORITE trade. I aggressively use it daily, writing calls then buying to cover as soon when it drops. The big benefit is you have theta working for you instead of against you, so you can bear the uncertainty of holding a trade longer term for the gain.

[@ttudoc5690]

If you could break this down step by step I'll nominate you for the greatest human award.

[@andrewhill7887]

@@ttudoc5690 nominate me $50 and I will personally teach you

[@noelstout3056]

Trading can be really profitable with the right skills, however setting realistic goals is the essential part of keeping trades in perspective.

[@ethansmith2499]

Most traders need to work out how much risk they're prepared to take on both for individual trades and the trading strategy as a whole.

[@bernardogutierrez8392]

Trade profits sure does depends on set goals.

[@sanjayprashad4695]

It’s best to trade part time. Build capital, acquire more trading skills and get better before fully going into it. What matters is your trading goals and your exit plan.

[@emmageorge3728]

Succeeding as a trader is extremely difficult, I’ve been trading for months and it’s been quite discouraging.

[@noelstout3056]

@@emmageorge3728 trading can be difficult when you trade without the right skills and expertise. You should probably get an expert to handle you trades while you acquire more skills. It worked really great for me.

[@nathanzaslow5614]

Attempting my first run at options today with a covered call on JetBlue: [S0: 10.05, X: 12, Exp: 8/21] Collected a $16 premium (~1.5% of cost), hopefully it expires worthless but I'm not worried if it doesn't!!! Thanks so much for your awesome guides :)

[@KidGreeD14]

Let us know how it goes.

[@gruponemesis]

what if you have 1000 shares....can you do 10 contracts?

[@nathanzaslow5614]

The King yes you could. The reason someone wouldn’t is simply that it is extremely capital intensive to own 1000 shares of any company. I would have had to put up $10,050 to buy 1000 shares and write 10 calls for $160 of premium. Same rate of return but further magnified risk attribution to JBLU price movements.

[@gruponemesis]

@@nathanzaslow5614 thank you so much! in my IRA account i hold 17 positions with 1000 share plus....I cant believe im barely learning covered calls!!!! i currently have limit sell orders on entire portfolio....i will change that in the am to covered calls. My entire IRA portfolio consists of swing trades...so covered calls will add a nice bumb to liquidity....WOW!!!

[@nathanzaslow5614]

@@KidGreeD14 JBLU traded sideways and the call went down in value to $4 from $16, so I bought to close my position and hang on to $12 of the $16 of premium, then rolled out to a call with a Dec 18th expiration (significantly longer term, but still $12 strike) for a nice $140 of premium. I hope it goes significantly up or down so either I am assigned and sell my shares for a profit or so that the value of the call falls significantly and I can buy to close and retain some of the profit and sell a new contract. I used the proceeds of the $140 of premium and sold some other positions to raise enough money to buy 100 shares of GE around $6.50 and sell a call at $7 also for 12/18 for $54 of premium. All in all, using covered calls to raise money and fund new positions is pretty awesome!

[@race2winss]

Honestly this video should be part of the trading options for beginners video... Im still learning and so lost on the entire concept of WHY is there options what is the purpose.. The beginner video only shows buying and I did get a idea of what was going on but once I seen this video of selling contracts, It all came together and I can finally see the big picture of what is going on here!! Good videos keep them going! subbed really enjoy your content!! Thank You!

[@humancentered3447]

Options were originally a vehicle to hedge... I just learned that recently btw. I’ve been smashing this stuff into my pea brain for about 3-5 months now and I still don’t really get it. The more I think I know, the worse my trade outcomes become and the more I find out that I don’t know. I look forward to the day that trend reverses.

[@sluggingstud89]

Oh wow! About a million options videos on KZbin in and countless hours of searching and this 15 minute video did the trick! You are awesome!

[@jf8138]

Discovered covered calls recently, and it sure is fucking amazing

[@dj_matanzaa]

Wonder if you still think this? Because I thought so too when I first started trading them and now I kinda hate them.

[@tedspeed3338]

@@dj_matanzaa Do tell...

[@dj_matanzaa]

@@tedspeed3338 It stresses me out. I've sold covered calls on positions where the stocks end up increasing dramatically in price and you're left in a predicament (because what you learn the hard way is that you miss out on any excess stock growth beyond the strike price). You can keep rolling back the call to further and further expirations but eventually you may not even be getting a credit for doing so, or you're stuck with the expiration 6 months in the future where your stocks are essentially locked up during that time period and you won't be able to sell unless you buy-to-close the calls at a loss. They're good for stable blue chip companies I suppose, and short term time-frames, but I regret my covered calls that I did on some of my growth stocks that I learned that I really wanted to hold on to. If you have the ability, and if the stock keeps going up, you can always just buy 100 more shares around the strike price to sell those instead, before the call gets assigned. But that's easier said than done, if you don't have the idle cash to do so.

[@tedspeed3338]

@@dj_matanzaa Thanks for the response

[@X11CHASE]

@@dj_matanzaa collecting relatively smaller premiums on selling unlikely-to-ever-be ITM calls would be a safer bet then, especially on something you’re holding long term anyway; I’m starting off by choosing strike prices that I find pretty unlikely during the time period I’ve chosen to try and avoid assignment Ultimately if the underlying 100 shares are something you’ve already seen a ton of capital gains on (very low cost basis relative to market current market value), then it won’t be the end of the world if you do happen to get assigned because that means the stock blew up even more-sure you’ll lose out on some extra profit if the underlying price goes above your written strike price, but again that was unlikely to begin with so you’ve probably made decent profit altogether-minimal risk to get those small & steady premiums, and won’t break your heart if you get assigned long short short Lemme know what you guys think, I just barely am getting into this and started implementing finally now that I have 100+ shares of something

[@nickmfnjackson]

I’m would like to dabble in selling covered calls. I don’t want to risk my current holdings. Would ford be a decent company to try? I wouldn’t mind risking 100 shares of Ford.

[@maxklein8286]

Seems like 100 shares of Ford is expensive AF tho. Hard to find a low price stock that you can trust to grow

[@mikeylovespizza4012]

Fitbit

[@nickmfnjackson]

I went with sirius. Working out so far!

[@iNVEST4WEALTH]

Question is, shud we jee writing call on declining price of share that we want to hold for ever? If so, how and which strike shud be selected regularly as the price keep falling?

[@peacedude1176]

Thank you I am new to all of this and have watched this video like 20 times. Questions 1 a good long term strategy if I want to keep my 100 shares would be for stock to rise but not hit strike price? 2 there is a possibility that stock hits strike price but buyer does not excercise? 3 do people who buy call options actually excercise the right to buy the 100 shares? Thank you for any input. Have a nice day.

[@GaneshGurumurthi]

When someone sells a covered calls the way you explained, will it show up as an open interest on the call side? If yes then, wouldn’t that show a false indication to some traders that a large volume of bet is predicted to take the stocks higher?

[@ofir7771]

When deciding aout the strike price, Is there more potential making money from the stock going up or from collecting the premium credit?

[@Gal5195]

אני חושב שזה תלוי בסיכון שאתה מוכן לקחת, אם נניח AMD לא שווה יותר מ60$ אז אתה תהיה שמח שהאופציה שמכרת תמומש ב60$ כי היית מוכר את המניות שלך במחיר הזה בכל מקרה, והרווחת פרמיה על הדרך אתה לוקח במכירת אופציה סיכון שתפספס עלייה גדולה מהמצופה, אם אתה רוצה להרוויח פרמיה ולא לדאוג שתפספס עלייה ולכן תהיה חייב להיפטר מהמניות במחיר נמוך יותר, אתה צריך לקבוע בשביל עצמך מה המחיר המקסימלי שלדעתך המנייה תגיע אליו

[@ameritrev]

This is the video I send to people when they ask me about selling covered calls

[@duke927]

I bought a stock for a dividend capture. Was eligible for the dividend. On the ex day the stock went down as expected but then it continued so I held on for a couple of days but it kept dropping but not rapidly I started selling calls near the original price. Long story short I kept selling calls at intervals 9 points down. There was a small rally and one of the calls I sold for a few cents loss. I started selling some puts too as the price finally seem to bottom. And still sold called as the stock rose back up and rolled the pits too. The stock after 4 months ownership and two dividends later(about 8 percent) dividend. I figured I’ve earned on a downtrending stock that is still only close to the price I paid I probably realized 4 or 5 points including dividends.

[@smoothiemaker5743]

Great video! thanks a lot. But I ha ve a question. How can we know this is actually a Covered call not just a naked call sold? There is nothing to indicate it is linked with shares actually. Thanks

[@theunknown1438]

Will this strategy work: Sell weekly calls and in the scenario it is increasing or coming close to the strike price, I buy the call for the same strike price. In the event it crosses the Strike price and shares gets reassigned or sold, I will use the premium + strike price money + the profit to minimize the loss of potential gains and buy back my 100 shares

[@cristobalml9460]

I wonder the same question but, what about if after a bought the call i sell again another call for the next week immediately?...

[@bsdgffishtuna5186]

I've recently learned about credit spreads but I'm having a hell of a time finding spreads that are worth the risk. You didn't get into in in your video

[@scotchy451]

that is the hard part and is where luck comes in

[@Rundatbul]

I think credit spreads are for the high rollers only.

[@mmmmmray]

Instead of straight up buying, you might want to sell a put for a price on the stock you would want to buy, that way you can collect premium there too.

[@tastyaloha8175]

Trying to understand your comment. Im new to all of this and ive been slowly studying for the last two weeks and wanted to know if you meant to flip from a call option to a put option on the shares that is owned to make a profit that way?

[@mmmmmray]

@@tastyaloha8175 if you own 100 shares of a stock already, you can open an options contract to sell a call on those 100 shares, this is called a covered call. Since you're selling an option contract, you'll collect premium for giving that option to the market. I would suggest paper trading this to further understand for yourself. Choose contracts that are 45-60 days out to maximize theta decay that will be on your side, two standard deviation out on your strike price will give you a 95% chance of it actually not hitting (think back to statistics, a bell curve, and standard deviation), and to further maximize your odds, you could technically analyze the price action of the stock you're holding with three indicators: RSI, MACD, and Bollingerbands to check for divergence; if the price action shows divergence and the stock going down, your chances of that stock price hitting your call strike price is less. Also, if implied volatility is high, your premiums will be more.

[@tastyaloha8175]

@@mmmmmray wow thanks for the tips my man! Screen shotting and saving this in my notes:). From the streets to the front of a computer..appreciate the info!

[@mmmmmray]

@@tastyaloha8175 Glad to be able to dish some information out. It's taken me quite some time to gather this information. Of course, will all tips, paper trade it and understand the dynamics for yourself. Good luck, bud.

[@tastyaloha8175]

@@mmmmmray thanks brotha!

[@gridironszn5512]

FYI that analogy at the beginning was EXACTLY what I was hoping. You should take the concept and use it to further explain options for visual learners like myself. Cheers!

[@kb4450]

im using schwab. it looks so archaic compared to what you use , but watching you i understood how to do it. im a 45 year old guy thats been buying and holding , dividend reinvesting just like my dad since i was 24 only in blue chip "safe' companies. $GME to the moon got me to revisit my accounts after leaving them collect dust. I feel like a fool learning from some kid but have already increased my modest portfolio ( i have never made more than 20$ an hour , never saved more than 3%) 10% in a month. I will never be able to repay you for giving this old tired bastard hope ( its kinda fun too)

[@lesbrown5344]

what is the best way to make money from investing?

[@charlotterobert5736]

I don't trade, I invest with a professional assigned by a crypto company that trades for us and returns profits weekly for me and you can invest your capital and get weekly Returns of investment (ROI) without any extra fees attached

[@charlotterobert5736]

The professional is Mrs. Marley Rose

[@edwinanccasichaco664]

I think the best way is to invest with a professional, at least it saves the trauma of too many losses This just surprised me because I also invest with Marley Rose.

[@wilfredbrown3814]

@@charlotterobert5736 Wow! I made a lot of money last year trading with Marley Rose. Damn......She is really a professional with her new strategies

[@patrickrobert7356]

You've just made my day guys, I've lost so much trying to invest on my own

[@dankelly]

"Worthless" [to the buyer], right? I keep hearing "expires worthless" so we make money. And, it hurt my brain because how could something be "Worthless" and yet be worth something to me.

[@bluesky5587]

Correct ..seller wins ...contract expires worthless

[@MrLastlived]

Worth something to you because you had a premium for selling the contract. Worthless because if the contract holder exercises, that only benefits you. The holder won't exercise because he could have just sold or bought normal shares at neutral instead of exercising at a loss.

[@cablekibble2942]

you sold something to someone for a price, then it became worthless. you win because you now have their money and they have nothing

[@larryschnellope80]

The original premium you collect for creating/selling the contract is yours from the very beginning, you’ll never lose that. The premium is not the “worth” of the contract. What determines the worth is the difference between the strike price and the price of the stock at the time of expiration and ONLY if the stock price is at or above the strike price you agreed upon within the contract. If the stock price never reaches the strike price it’s “worthless” or in other words, “USELESS”. The buyer cannot USE their option they bought from you because the criteria was never met.

[@billgrovejr.5261]

If the buyer sells the call instead of exercising, even when hes itm, you just keep the premium still and shares, correct? Tia. Keep making videos.

[@jzk2020]

yes

[@mpppizzle]

No bc someone else will buy them. The contract doesn't disappear when they sell it to someone else.. anyone care to correct me? That's my understanding

[@adampauley2767]

@@mpppizzle He keeps premium and shares, he only loses the shares if someone exercises the option and if the option expires he wins.

[@Mandinka711]

@@adampauley2767 Why wouldn't the buyer exercise the option though, that part I don't understand. Say I own 100 shares of AMD at $80 each and my premium is $1 a share at a strike price of $85. If the share price goes to $90 why wouldn't the option be exercised by the buyer ? Also, in the video, he (the seller) doesn't seem to collect the entire premium, why not ?

[@adampauley2767]

@@Mandinka711 Because they give up the time value of the option.

[@robertyoung406]

Your explanation was top notch. Went from feeling unsure about covered calls to feeling confident about it now. Subbed, thanks!

[@gieskejp]

Thanks for explaining this! What makes a stock favorable for this strategy?

[@yogisingh13]

Can you please do a lecture on selling premium. We would all appreciate it so much! Thanks in advance if you do consider it :)

[@RobertBullock]

I'd start with selling a put for a stock you like at the price you like. THEN if you get assigned and buy the shares at the strike price you chose, THEN sell the call at a strike price you like. Don't just start out buying 100 shares. Get the put premium first or you're leaving money on the table.

[@kev450]

Robert Bullock yup! This is called the ‘wheel strategy’

[@RobertBullock]

@@kev450 I know, but it wasn't mentioned here. Which is why I did. :) IMHO *EVERY* trade should be done with an option alongside for light traders but that's me. Unless you know it's going to move big, then write naked stuff. :) But that level of certainty is WSB or what we call 'insider trading'. ;)

[@EnjoyedSkillet]

I subbed immediately after you said "you're guchi"

[@walkersinclair8088]

Question - if your call is assigned and you are forced to sell your stock, can't you just buy the same amount of stock directly back and lose no opportunity cost? Assuming the market is still at the strike price when you buy back in. Additionally, if you see stock is likely to rise well over the strike price, you could buy shares at the strike price on its way up, knowing that then your covered call is assigned, you already own replacement shares that continued the market rise. So you would raise your cost basis - but lose no opportunity cost. In this way you truly are collecting the premium and losing nothing. Is that accurate?

[@alvinrodgers934]

I sold covered calls on Heinz 6 days before Buffet bought the company. I was a shareholder for over two years. Still made money but never forgot it.

[@DiamondsDancing]

Dang 😓 that hurts

[@MrJayBowser]

Absolutely great videos and real-world perspective Question: I just started trading options and have opened a covered call. As it matures toward expiration, are there other things you can do with it to get more value out of the contracts or is it typical to just let them expire OTM and keep the premium? Thanks.