How to Sell Covered Calls - Options Trading Explained

[@JakeBroe]

Give this video a LIKE to support my channel! Also check out my entire playlist on Trading Options here! kzbin.info/aero/PLscTZuOqKWIxSZzy4ObKWDznEsCot_1HU

[@jeffconner8231]

from the video @16:20 - Covered Call Tips 1) Sell mostly 1-2 month contracts 2) Sell covered calls when IV is high 3) Sell Calls with a Delta ~0.30 4) Watch out for ex-dividend dates 5) If you capture 80%+ value, then “buy to close” to lock in profit i found this slide really useful, and the explanations to go along with it were great too.

[@JakeBroe]

Awesome! Thanks for watching Jeff!

[@lj4001]

9:05 exactly what I was looking for, OTM is what I’m hoping for to earn $ even if stocks are losing value, but plan to keep long term, tho not sweating it if it’s Called away bc like you mentioned just buyback n Rinse-&-Repeat for covered calls. Thanks! *edit for DP: so my Call clearly OTM where it never dip below the strike price, yet it was still Assigned away n lost my shares at a lower price then I brought..🤔 Question why was it assigned when my CEI .50 strike Call for .40 “Sell to Open” n I was suppose to do nothing but wait for expiration? Did I have to “Buy to Close” to retain my shares? I’m on Lvl 1 so not allowed to do Puts. But I’m guessing I’m not allowed to do strike Calls below the current price? I don’t think it’s fair that these rules of Lvls are suppose to protect investors yet do nothing but scam newbies bc they still Allow these transactions to Sell & Assign alway shares! 😤

[@adilski]

You sir excelled at what many KZbinrs have failed at - explaining this concept beautifully! Thank you

[@nyhustler208]

You explained covered calls better than anyone who has tried to explain it to me. All everyone tells me is to trust them, and there's almost no way to lose money. Im just not that kind of person to believe that's the case without understanding the why or how

[@austindrury856]

Great video Jake! I recently started selling covered calls and have two more technical tips in case anyone else wants to try this out! 1. If you transfer funds to your brokerage or sell a position for funds, then buy 100 shares of something for the purpose of selling a covered call and sell the covered call the same day, be cautious. If the buyer does, for whatever reason, exercise the contract within the time it takes your funds to settle, this will invoke a Good Faith Violation (at least for Fidelity and Charles Schwab) . 2. Low premium calls that are very short may not be ideal, as there is a $0.65 fee (per contract not share). If you sell a contract that's just 1 week and it only has a premium of, say, 0.02, this is $2, but 0.65 (or 33%) of your premium ends up going toward this fee.

[@JakeBroe]

Great additions Austin! I didn't know about #1 and yeah, #2 is something for small dollar investors to remember!

[@eileenlamendola6190]

Thanks!

[@eileenlamendola6190]

Thank you Jake! Your videos are very easy to follow. Learning to trade options can be quite daunting. Your tutorials are perfect for new or curious option traders. Especially those who want to know more than the standard call/put option, and who need to be walked thru the process. 👍

[@JakeBroe]

Awesome! Glad you found the playlist Eileen. Thanks so much for the support for my channel. Good luck with your trades!

[@Tafuny]

Jake, this is one of the best videos I've come across breaking down covered calls. I've read up on it and often times I'm confused. Thank you so much!

[@JakeBroe]

You are very welcome Tafuny! Glad you found my channel!

[@MrNetsecure]

This is the best course on option trading out on the internet. Period!!! Thank you so much for creating this amazing content. These videos taught me option trading a few years ago and i still watch them time to time to revise my knowledge. Thank you Jake! Im a seasoned trader now just because of you!

[@VerseKiller326]

I loved the way he explained how to apply the lessons in real way!!

[@galleysarai2845]

I love the fact that you show examples on how to trade on specific brokerages like Fidelity in your other videos. I love it. THANK YOU Jake.

[@praveenprakash4494]

thank you jake for the clarity , really helps 😊.

[@VerseKiller326]

This was the first vedeo that I actually learned how to apply, using the real buying options, great JOB!!

[@whitefox8291]

Thanks Jake! This is one of the best options video ive I've watched, very helpful

[@Walt1972]

By far the clearest and simplest explanation I have found. Thanks.

[@JakeBroe]

You are very welcome Norm! Cheers!

[@nathana2714]

Been going through finance and investment channels this year and just came across yours. You give very lucid and helpful explanations. Thank you for the uploads and please keep them coming! 👍🏻

[@art_without_borders]

Jake really is the best on investment channels. he deserves way more subscribers than he currently has. I am sure with time his channel will gain 100K and more subscribers.

[@JakeBroe]

Will do Nathan! I got a long list of videos I need to make. I just have to find the free time to get them all done, haha! Thanks for the support!

[@JakeBroe]

My goal is to hit 100K by the end of the year! We'll see if I can make it!

[@D.rod_riguez]

This dude the best teacher on the internet

[@raymondsimmons1617]

Great video. Thank you Jake. The downside to covered calls are (1)losing potential upside during the contract and (2) price of stock plummets, making premium insignificant. There are more positives than negatives. Of all the positives, I like, in particular, how the premium gives me more flexibility. I have downside protection and can still make a quality return on the position.

[@JakeBroe]

Very true Raymond! Cheers!

[@gtonyrodriguez9984]

Thank you, you finally made understood how to keep my stocks, I am accumulating my stocks for my retirement and I don't want to lose them

[@JakeBroe]

You are very welcome Tony!

[@abrahamjoseph8554]

Thank you so much Jake. You are very knowledgeable and a wonderful teacher. You know how to explain things. This will definitely help very much people like me. Really appreciate your hard work

[@garthmccarthy4572]

So brilliant Jake - all the way to the end especially capturing the 80% buy to close

[@pedromarquez3714]

I’m just trying to learn on how to do options, I do have stocks with SHWABS, but I just wait for the price to get me some profit, and sale it. I been missing a lot!!!! Thanks for such a good explanation!

[@LSinclair]

You’re a really good teacher! This explained so much. Now on to your doing them on Fidelity! Thank you!!

[@craigchambers4183]

I'm going to check this out. Won't waste time talking about my devastating loss via options through a company some years back thinking those fellows know what they are doing and I don't so here is a chunk of my savings... anyway, this explanation was very VERY helpful. Sound like something I can do. Appreciate you labor, new friend Jake.

[@JakeBroe]

Thanks for watching Craig! Best of luck!

[@orangeblock3792]

This video is PHENOMENAL!

[@cjoshmartin]

Thanks for explaining it so well and not making it boring

[@JakeBroe]

Thanks for watching Josh! Cheers!

[@kendowarrior99]

I'm bullish on GE so I took advantage of the dip today to get my small account up to 100 shares with the intent of selling covered calls on positive news for them.

[@JakeBroe]

Maybe! We'll see if they can turn it around and pay down that debt that is holding them back!

[@kendowarrior99]

@@JakeBroe Yeah, the $30 billion deal with AerCap to offload their airline leasing operation seems like a big move in that direction but investors seemed to respond to the more superficial reverse split news.

[@galleysarai2845]

Hi Jake, finally I found your channel where you've made options trading explained so well. THANK YOU VERY MUCH! Keep it going please.

[@zsynhgd]

Excellent! Super video! This is very helpful. Thank you!

[@gtonyrodriguez9984]

Thank you so much this is the best explanation to understand cover calls, now I feel ready to start selling calls

[@JakeBroe]

Awesome! Glad you found my video Tony!

[@cancanturco]

Exactly what I was looking for! Very well explained! You got your like and a new subscriber!❤

[@louis20122]

You mentioned Delta at 6:33. I think QYLD uses VWAP, Volume Weighted Average Price.

[@aaronshrope5695]

I appreciate your videos. I like the Wheel method. It's worked really well so far.

[@JakeBroe]

Nice! I will eventually make a video on the Wheel Strategy. But a video on cash secured puts is next!

[@gandmemoney]

It’s hard to believe that you are making sense to this old man, thanks Jake

[@georgefieldsjr.640]

Jake, Your Knowledge of Options is Amazing ! ,THANKYOU for your Videos , So well explained and Easy to understand ! I watch his video over and over again.

[@JakeBroe]

Awesome! Thanks for watching George!

[@victormtz16]

Let’s see if I learned. I have 260 shares of GSAH. I am comfortable selling at 12.50 in the 12 days expiration delta of 0.03. Easy 20 dollars for two contracts (my trade idea of low risk for practice round) So I applied to Charles Schwab level 2 options and got accepted. Come Tuesday I can put in an order: Action STO (sell to open) As a means to practice at my own risk, practicing what you educated Sorry for long read. Appreciate every video. Grats on doubling account sooner than expected!

[@wkhoo]

Great Video Jake. So clear and concise. Is this your favorite and most trade strategy? What are the stocks that you frequently trade covered calls?

[@JaeHPark-so7dy]

You would also get the cap gains from ITM to cost basis. $58.55-$56 in the first example

[@asia-88]

Best CC explained ! Thank you Jake !

[@JakeBroe]

Thanks for watching Sasha! Cheers!

[@davesaunders59]

Brilliant video. Very clear and to the point. Thank you.

[@Joe-qu8uk]

So well explained, nice job

[@crystalcrawford2317]

keep these videos coming Jake!!! these are the best explanations

[@JakeBroe]

Thanks so much Crystal! I appreciate that and more videos on trading options are coming!

[@crystalcrawford2317]

@@JakeBroe great i cant wait

[@coolic21]

Great video! I cover call Tesla weekly. Their IV is insane.

[@JakeBroe]

Thanks coolic! Cheers!

[@matthewsherwin8741]

I only wish more people were able to explain covered calls as well as you can, Jake. You did a superlative job. I appreciate your videos; this one increased my understanding of covered calls and now I am working on wrapping my head around puts. You must be very good at math; you have a strong work ethic as well. Stay safe and strong, glad you were vaccinated! 👍

[@JakeBroe]

Thanks Matthew! Selling cash-secured puts will be coming next week! And yes, I love math and do it for fun on Khan Academy even though I've been out of school for 14 years and don't need it. I just have a mind for puzzles and numbers and problem solving. It's just popcorn for my brain!

[@matthewsherwin8741]

That’s great that you love math; that obviously comes in handy. I’m more a humanities man and a bond man myself when it comes to the financial markets. Interest rates are nowhere near what we had in the late ‘70s, 1980s and even the early 1990s so I gradually rotated somewhat into stocks. Back in the day I could walk into a Manhattan bank and get 13.3 % on my money and if I didn’t touch the interest the yield to maturity was 14% on a five year CD!

[@wess8131]

@@matthewsherwin8741 But you were loosing most of it for inflation

[@matthewsherwin8741]

@@wess8131 Well to some degree yes but that's the price to pay for the security I got by investing in bank CDs and government bonds. There's so such thing as a perfect investment in my opinion.

[@davidhibson3389]

Great video Jake! Another tip to add, I have noticed that the premium is better for STO CCs (or BTC CSPs) when the stock rises. Likewise it is also better to BTC your CCs (or STO CSPs) when the stock drops. I try to wait for a 2% movement in the stock price. I wheel in my Roth IRA, so I don't have to worry about the taxes.

[@JakeBroe]

Good to know David! Thanks!

[@GilbertFleming]

This was very valuable.

[@JakeBroe]

Thanks Gilbert!

[@dank9765]

Thanks Jake, very helpful and very clear selling calls tutorial

[@AJF66OG]

Jake, your break even at the Verizon example at time 8:50 is incorrect. You added the premium to the strike which is if you buy the call. In your example you sold the call so you subtract the premium from the strike for your break even.

[@JakeBroe]

You are correct A F! That is a typo!! Nuts...

[@AJF66OG]

@@JakeBroe no big deal Jake. Really enjoying your content. Love your approach/honesty and love you’re not going for the typical financial KZbinr clickbait titles or thumbnails. I can’t bring myself to watch those guys anymore. We all know who they are. You’ve inspired me to only concentrate on quality companies. I fell for a few of the meme/biotech/electrical car/SPAC companies because of the option premium and lost too much money along the way. Thank you!

[@patrickturgeon5410]

great stuff. i would love to see an example of all this start to finish again while doing a walkthrough on Schwab especially part 5 at the end. Im a very visual learner and seeing all the steps connected helps so much. definitely my favorite channel.

[@JakeBroe]

Thanks Patrick! I have more videos related to trading options coming soon!

[@SlickNickster]

Thank you!

[@JakeBroe]

Cheers Nick!

[@ianfrisinger7262]

been learning so much from your videos man thanks so much!

[@JakeBroe]

I appreciate you watching Ian! Cheers!

[@wolfgangi]

16:16 Jake can you explain little bit more about this buy to close strategy? I'm little confused, so buy to close is to make sure that the option doesn't get exercised in case the contract moved in the money?

[@JakeBroe]

If you "sell to open" a put or call contract, then you were paid the premium. If you "buy to close" that same put or call contract, then the two options cancel each other out and you don't have any obligations to anyone to buy or sell stock. You almost always want to "buy to close" or "sell to close" to get rid of your contracts before your expiration date or else things can get messy.

[@wolfgangi]

@@JakeBroe Thank you for the explanation. In the video you mentioned that locking in profit if we already captured majority of the premium to avoid the risk of stock price going up. The reason why we would want to do this is because we are still bullish and we think that the stock price might go up a lot. So we'd want to buy to close to lock in the majority of the premium AND still retain our shares to capture the upside move? Thank you!

[@Bangpaulxu]

Love this vid, thanks Jake!

[@JakeBroe]

Thanks for watching Bangpaulxu! Cheers!

[@BahadirSimsekMD]

Very nice video, Jake!

[@deadleague3618]

Tip number 5 is something I need to learn. Do I have to give back any of the premium if I buy to close? In your example would I pay $20 for the $100 premium where I keep $80 and then I can use the shares to sell a new one?

[@leek8638]

I too would like this explained more.

[@polarbsdlkfj]

Very impressed with this channel! Thanks for being you, Broe.

[@WOZlicious]

Hi Jake, subd and liked! May I request a few topics? I'm new to covered calls and using Fidelity so your video was super helpful. One question I have is on timing of the expiration. The scenarios I need help with are 1) when dividends will be paid (i.e., if the contract is 1 week away from the dividend payout) I see you cover this in the 4th tip, but hoping you could do a tutorial on this 2) owing the security for less than 1 year which would trigger STCG 3) How should we think about the step-up basis if we have to sell and then repurchase the stock 4) Is there a way to set this strategy in auto-pilot (i.e., buy options 4 weeks out with delta between .25-.35, if called out, repurchase stock, purchase options, repeat).

[@samanthacox9407]

Love your channel, well done mate

[@petergutowski9337]

Very good video. HOW DO I KNOW THAT OPTION WAS CALLED AWAY?

[@JakeBroe]

Hey Peter! Thanks for being a channel member! If you sell a covered call and the contract expires in the money, then you will have your stock called away the next day and you'll be paid the strike price on the contract. Cheers!

[@peternguyen1960]

Hi Jake, excellent video. I love your covered call tips. They are very practical. Thanks.

[@JakeBroe]

Thanks for watching and the comment Peter! Glad you found the tips helpful!

[@peternguyen1960]

​@@JakeBroe i haven't known about selling covered call until I watch your channel. I must thank you a lot. Now, I am selling BA Apple, Baba and Nio covered calls for a passive income.FYI, Nio pays premium very high. Jake, you should consider buying Nio shares to collect premium.

[@johnporter5828]

Jake, excellent presentation about covered call selling. I use Schwab, and refer to Delta when setting a strike price. They have a calculator which looks valuable (Black Scholes based). Could you do a video on how to use it?

[@infate-726hl87]

Does anyone else notice how Jake changes his background poster quite frequently? Nice one there, bud

[@JakeBroe]

Haha, just something I do to entertain myself a little bit. Cheers David!

[@Mr-fn3yb]

I thought I was the only one.

[@charlessaco4495]

Thanks a lot for this video. I have a noob question, let see this situation: - I sell a contract (30 days expiration) $50 strike. - In 15 days the stock reaches $52 value but the buyer don't exercise the contract. - Then stock goes down to $48 in the expiration day. Question is buyer: can still buy my stocks at expiration day?

[@h316tran3]

JAKE: can you explain more about the #5 @16:18' kekeke Thank you sir

[@frontpineapple4489]

Great video. Clear explanations. Thanks for sharing your knowledge and appreciate it very much!

[@rodrickedwards2759]

Great explanation. Thanks.

[@AashimGupta15]

Great video. Well done. Thanks for the details.

[@JakeBroe]

You are very welcome Aashim! Thanks for watching!

[@hankhof2]

That was an awesome video, many blessings

[@JakeBroe]

Thanks Henry! Cheers!

[@carlosamaldonado2910]

Hi Jake very good explanation, I hope you answer my question, the taxes on options depend on how long I have been holding the stock ? Thank you 👍👍

[@JakeBroe]

Hey Carlos! The taxes depend on how long you hold that contract. If you sell to open and then buy to close or exercise the contract, that is a short term taxable event if it was less than 1 year.

[@lynie3761]

Thank you for the amazing tips!!!

[@JakeBroe]

You are very welcome Lynie! Cheers!

[@cancanturco]

do you work with Futures? can you explain me how to trade Futures, by any chance?

[@MrUkun]

Thanks for the valuable video, interesting and enjoyed.

[@JakeBroe]

Great! Thanks so much Omar!

[@kylew4692]

great video man

[@JakeBroe]

Thanks Kyle!

[@historyofindia3992]

Jake, Great video. Thanks!

[@JakeBroe]

Thanks HoI! cheers!

[@Reza16888]

Excellent video! Thank you. Can I sell-specific covered calls on Fidelity? For example, I have 200 shares of stock XYX. I bought the first 100 shares for $50/share and the second 100 shares $60/share. Can I only sell covered call against the second 100 shares? In other words, is there any sell-specific-to-open in Fidelity? Thank you.

[@stevenbi7495]

Thank you Jake for this really informative video!

[@JakeBroe]

You are very welcome Steven! Cheers!

[@TranNguyen-bg3ti]

Thanks so much for the tips 👍

[@terencefung9408]

Hi Jake, I'm not clear the difference between "Sell to Open" vs "Sell to Close" for "cash secured put".

[@bhavikbhat]

Hello Jake, I have been following your videos and guidance. Thank you. Quick Question - I created a Covered Call for the Stock I own 2 weeks ago. Right now the Strike Price ($92.00) is way below the actual stock price ($101.00), what should I do in this case? Let the call be expired tomorrow? What actions should I take to be profitable? Huge thanks in advance.

[@lauriejones5757]

Yes I need help to understand

[@LTChayden]

Jake, learning a lot from you. So if an Option chain, i.e. Honda Motor Co./HMC - has no Volume, does that suggest no market for that Option/Stock and no need to place bid ?

[@JakeBroe]

Some stocks are traded more commonly than others. Your broker should show you the open interest and volume of trades in a day for a given options contract on a stock. If it doesn't have a lot of trade activity, then I would look for a different stock to trade on.

[@texaseric2799]

Thank you for this.

[@JakeBroe]

You are welcome Eric! Cheers!

[@roburb73]

NIO has been a great covered call stock, has made me a few $$$$ per month selling in and buying out.

[@JakeBroe]

Nice Rob!

[@nitk7220]

Do you classes on options and how I get into it

[@cb24955]

Jake, when rolling a CC up and out (buy to close) do you use the bid or the ask price as your limit to execute it immediately?

[@crippledgenius]

Yeah I've done well with coverds sometimes I get nailed but all part of the game

[@JakeBroe]

Part of the game for sure!

[@GilbertFleming]

Jake, would you do a video re QYLD and RYLD?

[@JakeBroe]

Hey Gilbert! I don't know the details of those funds, but I can look in to it. Cheers!

[@GilbertFleming]

@@JakeBroe QYLD is a fund that does covered calls on QQQ. It has a dividend of over 10%. But the net asset value decreases over time because the big moving stocks get called away.

[@gflem]

Ryld Is a covered call ETF. It gets over 11% dividends for the last four years. It slowly loses the value of the stock because all of the winners are being sold out under the covered calls. Invest in the Russell index. It really went down hard the last week.

[@janice7958]

If the stock price is going down, should you sell early or hold to term.

[@gtonyrodriguez9984]

I will Check it out

[@livemiamistyle]

Hi Jake. How does the contract end? Will my brokerage automatically sell my stock if goes above the strike price? Or do I have to buy to close? Thanks for a great video!

[@itsmeatiq]

Thanks Jack for your well explained videos! I have a question, how to exercise an option? Do I have call the broker? And is there any fees involved?

[@JakeBroe]

Hey itsmeatiq! You already paid $0.65 for the trade with your broker, so that is the only fee. As far as how to exercise if your bought and are in the money, I believe you will get an e-mail after market close on Friday and will have a couple hours to respond to it saying you want to exercise.

[@walkerjudge9154]

Is market cap What makes a good cover call because I have some high yielding dividend stocks that don't option trade very well

[@walkerjudge9154]

Or is it the stock price

[@levont.husser153]

Great video

[@krishr2009]

fantastic video

[@MrLegantWong]

Thanks Bro!

[@wolfgangi]

Great content , can you make more videos on option spreads in the future ? Thank you !

[@JakeBroe]

For sure WI! Cash secured puts is next, but I will make videos on spreads.

[@lancequas]

Can you explain the VIAC c Jan 21 '22 $13 strike? How could you not make money buying that with a $73.25 bid?

[@JakeBroe]

Sorry Lance, not sure I follow what you are asking in that question.

[@BekTesfa]

Really helpful. Thank you! Quick question tho: assume that I sold a covered call at a strike price of 100. If the stock price jumps to 150 few weeks before expiration, is the option normally exercised or do they wait till the option expiration date at which point the stock price has a chance to go below 100 and the option is worthless? Also can you share the website for checking the delta associated with a given strike price? Thank you!

[@mariamkarim8864]

I am still trying to figure out what the 5th tip means!! I thought once the stocks are bought we keep the profit plus premium. I am confused as in where the 'buy to close' came from. Sorry this question might be silly for some but for me its confusing.

[@anthonytu7302]

yo Jake, after watching your video i placed a cover call but i have a quick question if you could help. let say i owned AA and it current price is 20, i sell to open strike price at 22 in 1 week but 2 days later it spike to 24. what happens next? do i have to do anything like buy to close or what? thanks

[@JakeBroe]

Hey Anthony! You can buy to close back your contract for a loss. Or you can do nothing and at expiration (over the weekend), your stock will get called away and you'll be paid the strike price of $22 a share.

[@100perdido]

So if you buy a stock and sell a covered call you get the strike price plus the premium and lose the stock.. If it does not reach the strike price you get to keep the premium and the stock. But if the price of the stock goes down, you lose by the amount it goes down minus the premium you collected for the covered call. Is there a way to protect yourself should the price of the stock fall or is that like trying to bet on both horses in two horse race? I'm looking for a free money machine which carries no risk.

[@JakeBroe]

You basically have it. If the price falls, just keep selling covered calls to lower your cost basis and make money. If you think a stock you sold a covered call on will go down, then you can buy a put on it. But it's weird to bet against a stock you own 100 shares of.

[@100perdido]

@@JakeBroe Thanks. So it's a matter of if the put costs less than the money you get off the covered call, you can make the spread between the two. I now have to figure out how to price the puts and calls to see if I could make this work.

[@exeternewengland671]

What happens, if, for example, VZ reaches and way above $26 that weeks before the expiration date? Sell to close early or waiting to expiration date?