The Complete Beginner's Guide to Selling Covered Calls (2023)

This video is the COMPLETE BEGINNER'S GUIDE for Selling Covered Calls here in 2023. We will COVER EVERYTHING You need to know for Selling Covered Calls
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#coveredcalls #sellingoptions

[@SwoffBass]

For somebody just getting into this…THIS video made all the other ones click. Very clear down to earth, ‘non-jargon’ explanations that enable me to move forward with confidence in this type of market trading. We’ll done sir!

[@AverageJoeInvestor]

Thanks! Appreciate the feedback! 👍😎

[@gameplayparadiseofficial]

I made a rookie mistake last Friday and didn’t sell the AMC $5 covered call, I thought when the market closes, my covered call expired. But really, it expires at the end of the day. I didn’t know AMC ruling was that day in the AH and AMC shot up to over $7, thus I had to sell it at $5 with an average of $4.03. If I had closed the covered call before the market closes and I sold AMC AH, I would had an addition $2-3 per share on my AMC holdings lol it’s okay, still made my profits. Live and learn 😊

[@Lou_Snuts]

The income tax considerations are also important. Where there are gains on covered calls (either through closing out the position or expiration) those gains are ALWAYS treated as "short-term" capital gains, regardless of the date the position was opened. As a result, those gains are taxed at the federal level at the taxpayer's TOP MARGINAL RATE. Additionally, it might be a good idea to discuss using the "delta" and "theta decay" factors in evaluating potential assignment or non-assignment. Also, covered calls can be combined with a hedged dividend capture strategy, where you simultaneously buy the underlying stock and sell a covered call after the ex-dividend date. In such cases, people may only want to own the stock on the ex-dividend date, and have it assigned after the date, just to capture the dividend.

[@htsyami]

Doing this strategy in a Roth IRA means all the portfolio income is tax free because it is not part of the original contributions. Downside to the Roth IRA is that you have to be 59.5 years old to take out profits without 10% penalty and annual contribution is capped at $6,500 (for 2023) annually. Other than that it can be a great way to generate income. Also, if done in a non-tax advantaged account like a standard brokerage account then there are ways to legally reduce the income with deductions etc (like standard income). Either way, it’s a potentially great strategy to gain additional benefits on top of owning the stock.

[@cjc2611]

I'm still new to this so forgive me but let's say you have a CCO that's expired for obvious reasons. Is the money you made off the sell also taxed? I'd assume it would be, right? So essentially you're risking an expired CCO AND getting taxed on the buy.

[@LuangPraBong]

Very nice job. I have probably watched 10 videos on this in the last few weeks, but now things are finally starting to make sense. Thanks very much for the easy to follow video! I will make my first covered call option trade next week.

[@KA-NV]

Excellent video. Clear and precise explanation. The only part to consider is the taxes to pay for gains and premiums in each transaction.

[@robles100]

Super easy to understand and very helpful video 👌 Possibly the best on KZbin 👍

[@stevenmatos7912]

Wrote my first covered call today! Thrilling! Thanks for all your videos and education.

[@goodluckfox]

How has your covered calling been working for you?

[@jaer5]

Love the videos! Very clear explanations.

[@CGAZ66]

I do not know much about cover calls so have not got into it until I know more...Great information and I hope you make more like this. Thank you.

[@AverageJoeInvestor]

AWESOME!! THANK YOU for the feedback!! 😎👍

[@williamq5627]

Amazing explanation!!👍🏼👍🏼thank you very very much!

[@burnsurvivor88]

Thanks for part 1 of option trading. I'm still learning about options trading and this was very helpful.

[@AverageJoeInvestor]

AWESOME! THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@imrekovacs8309]

Hey Joe! This is the best explanation ever! Thank you and God bless you! 😎

[@AverageJoeInvestor]

You bet! THANK YOU for that feedback! THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@edlafond1]

Great vid as usual Joe!....I like to start a position with a cash covered put....I'll sell covered calls if I let the puts exercise. But 99% of the time I'll take profits instead. That is unless it's a stock that I'd like to hold long term.....

[@AverageJoeInvestor]

I do too! 👍😎 THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@avaaaaaaaaaaa]

You explain this perfect, thankyou.

[@PaulBrawl-lc7gz]

Thanks brother!

[@dst7ssa]

You definitely earned a follow with this one

[@chasingviolet6330]

I agree with the other commenters. This made all the other videos and reading I've done click. Thank you very much.

[@Kzvuyp]

Thank you Joe!

[@zamin_ali]

It's important to note that your shares can be called away anytime before the contract expiration date.

[@AverageJoeInvestor]

Yes this IS TRUE however the only time this would ACTUALLY happen in real life is RIGHT BEFORE an Ex-Dividend Date generally. Otherwise there is no value in requesting assignment. THANK YOU for watching and for leaving your $0.02 in the comments! =)

[@zamin_ali]

@@AverageJoeInvestor I have had my shares called away from me and it was not near an Ex-Dividend date. I can send you screen shots from my brokerage account to show this if you like.

[@thomasd5488]

@@zamin_ali No one is doubting that you have had shares called away early, before expiration. I have too, but on the few times it happened, it WAS the day before the ex-div date. They profited from receiving the dividends. Ask yourself, what advantage does a call buyer have, in exercising their call option early, before expiration, if dividends are not included? They would make MORE profit by SELLING their call option to the open market, rather that exercising it. Here is why. When the buyer of a call option exercises their option early, they only benefit from the INTRINSIC value increase in the option. They LOSE the EXTRINSIC (time) value of the option premium. They would make MORE money by SELLING their call option to the open market, and collect ALL the INTRINSIC and EXTRINSIC value of the premium. THEN they could use that money to buy the stock at the current market value. I do know that the less EXTRINSIC value you have in your option premium, the more likely your call option will be exercised early. Ever since I had a few deep in the money call options exercised early, I began ROLLING the covered calls up one strike price at a time, and out to an expiration date, far enough away, to earn a small net credit, whenever the EXTRINSIC portion of the premium fell below 10 cents. The BUYER of the covered call, who exercises the covered call early, while the EXTRINSIC is 10 cents, they would LOSE $10 per covered call contract. They would lose even more, if the EXTRINSIC portion is more. Buyers and sellers, are both motivated by profit. Why would someone knowingly throw away $10 or more per contract by exercising early? They probably didn't know any better. There is no accounting for the actions of new traders, who don't understand the nuances of buying options, and choosing between exercising them early, or selling them back to the open market. Hope this was a helpful explanation.

[@BC-fu3tg]

Maybe don’t put your shares up “for sale” unless you are willing for them to be sold.

[@dankleinfelter2871]

Hi Joe, Appreciate the video. It’s good like your others, but would like to see more advanced topics. Question: Do you use margin? Could you do a video on margin/portfolio margin? Either way, thanks.

[@AverageJoeInvestor]

Thanks for the feedback. I do not personally use Margin. Too risky for me. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@juliepowell3566]

Great video Joe. Thank u

[@AverageJoeInvestor]

You bet Julie! THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@LofiCity2000]

This video made me a subscriber , Thanks !

[@robertquinn7341]

Great video Joe, What is the best way to find good low cost stocks, with good option premium? Thanks

[@iftak01]

Good nice to understand video on this

[@ferr0gan]

Great video, now do a guide to sell puts, extra time dedicated to search criteria: stock price/ account size, trade volume, stock market cap. Stock you want to owe no longer fits the bill with a 15k size account

[@jaavonmatthews9231]

Hello. Just came by this video for the first time and I really appreciate this knowledge! Definitely took notes. Quick questions: 1. What concepts and procedures can I learn as a complete beginner after this video? 2. What strategy can I learn and use to gain and maximize cashflow in the market within a consistent period?

[@sammylloyd98]

I love this video. This is literally the ONLY way you should be trading. I’ve never lost a trade using this strategy. However, I didn’t have much capital to start out with so i used the poor man’s covered call strategy. It allows you to leverage your money a whole lot more!

[@zamin_ali]

Can you make a options video on what to do when a stock or ETF you own drops in value. For example if you bought Bank of America before the drop it recently had. I don't mind holding the stock and waiting for it to go back up, but how can I still generate income even though I can not sell options at or above my strike price. Thank you for the video.

[@thomasd5488]

Got any unused cash in your account? Sell weekly, out of the money cash secured puts with a 25 or less delta, to earn weekly profits. You can consider the CSP premiums as a way to lower your break even price on the shares you own. Once you get the break even price of your shares low enough to sell covered calls that earn a decent premium, you end up with your own personal ATM machine. PS: If the out of the money CSP's become in the money, you can roll the strike price down, one strike at a time, and out to an expiration that is far enough away, to earn a small net credit. Rolling allows you to avoid assignment, reduce the strike price, AND get PAID a net credit for doing it.

[@AnyangU]

I really enjoy your videos. This one was extremely informative and interesting. I was wondering if you could explain from the opposite perspective. You have given a good explanation on how people can make money selling covered calls. But, it takes two to tango. People buy covered calls because they too can make money. How do people make money if they are buying your covered call? I know they get the stock at a cheaper price but your video makes it sound like it almost never happens...or at least shouldn't happen.

[@AverageJoeInvestor]

GREAT QUESTION: Yes, people buy options because they THINK they are going to make money. But this is speculation. The have to guess price movement perfectly. When they buy a call option they NEED to have the price go UP beyond the strike price and beyond the additional cost of the option before they make any money. Will they occasionally guess correctly? Sure. But often times they do not. There are other investors that BUY OPTIONS but because buying those options is part of larger strategy such as Credit Spreads, Strangles, Butterfly trades, etc. The good news as an option seller is you almost ALWAYS WIN. You win if the stock price does NOTHING, You win if the stock price goes down. You even win IF the stock price goes up but stays below your STRIKE PRICE. =) Hope that helps! THANK YOU for watching and for leaving your $0.02 in the comments! =)

[@dominiquetheeasyminimalist]

That is a loooot to take in! 😂 Will watch at a slower speed and take notes. Is there a way to test this in a “virtual’ portfolio? You’re simply the best, thank you!

[@AverageJoeInvestor]

Thanks for the feedback!! I believe ThinkOrSwim and WeBull offer paper trading for options. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@ryantuck5716]

do you have a video that talks more about buying back your cover call and the strategy you do around that to maximize profit? Thanks for the video great info!

[@user-xe7dd6yg2y]

Great video

[@brucef1299]

Sweet. Off to dinner now, but will watch tonight. Thanks.

[@AverageJoeInvestor]

AWESOME!! THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@sctt2525]

Loved the video. Very well explained. If the strike price is met, and the 100 shares are to be sold,; is there anything for the seller to do, or are the shares automatically removed from the portfolio?

[@inkedt5832]

I am also wondering this

[@bradysmith2020]

Would love a video explaining in a bit more detail why and when you would buy to close your own option. Also, would it work the same with selling cash covered puts?

[@JuannyBoy2023]

Pretty much the same

[@LuangPraBong]

Same here!

[@mrdirexion]

ok let's see if I got all this right... Calls are... I mean covered calls... the price plus the market... I mean stockchain... I mean blockchain...wait hold on I think I got it... call, covered my shift today... I'm lost. Great video!

[@sk_77]

Great video for beginners - thank you Joe. Question: My covered calls are almost in the money with expiration 2 months after. If CCs gets in the money - will it get assigned immediately?

[@Weezy420]

Great explanation Joe

[@AverageJoeInvestor]

Thanks for the feedback! I really appreciate it!! 👍😎

[@jaer5]

Can you do a video, or do you already have one, showing a real-life example of buying back a covered call? I want to enter into a covered sell option soon with multiple contracts, but before I do, I want to make sure I am confident about the early buy-back.

[@Scott_T_]

If I sold 1 covered call at say $200 for a Dec 31 expiration and the price of the underlying stock goes to $205 on November 10, which is before expiration, will I have the 100 shares called away from me on November 10 or will I still keep them since I still have over a month until expiration? I get selling on the put side as nothing is going to happen until expiration but I'm wondering how much of an eye I need to keep on the calls if the stock can get pulled away early before expiration. Thanks!

[@alexanderbimanand954]

1. What happens to the premium that you have collected if you close before the expiration date? 2. Do you have I keep the stock that you have written covered calls against until the expiration?

[@newenglandnomad9405]

Thanks for the dumbed down version, it was helpful. Since 100 shares is a lot of shares, what are maybe the top 5 best stocks/etfs to write the covered call on?

[@AverageJoeInvestor]

GOOD QUESTION! It definitively depends on what you are trying to accomplish but for me I prefer to use dividend stocks as opposed to growth stocks. Here are some lower cost dividend stocks I have recently used: BAC, HPQ, MPW, USB, FBNC, PFE and VZ. THANK YOU for watching and for leaving your $0.02 in the comments! =)

[@newenglandnomad9405]

@@AverageJoeInvestor You the man!

[@raysgames9778]

Thank you for the video. Because of your videos, I have started to do a few covered calls, but I did have a question. If I have a covered call open when the ex dividend date occurs, and after that date, my option is called and the stock is sold, do I still get the dividend payout? Or do I not get a dividend payout from the stock I own if it is a part of a covered call at the time? Thank you for the great content, and your time.

[@htsyami]

Best strategy is honestly to not carry any open options positions through the ex dividend date. Just makes your life easier.

[@thomasd5488]

As long as the shares are STILL in your account at the opening bell of the market, the morning of the ex-div date, you have qualified to receive the dividend. You could sell your shares ON the ex-div date, and you STILL qualified for the dividend, because they were in you account at the opening bell. What you need to be concerned about is EARLY EXERCISE of your covered call, the day or two before the ex-div date. They could STILL be exercised by the call buyer, even if the strike is out of the money. A buyer of your CC, has the right to exercise, at any time before expiration, regardless of whether it is in the money or out of the money. A savvy call buyer will calculate if it is still profitable to exercise early in order to qualify for the dividend.

[@raysgames9778]

@@thomasd5488 thank you. You really answered all the questions I had, and I get it much more clearly now. I really appreciate your assistance.

[@kakitling2191]

Thank you so much for your video, you opened a door for me to earn some passive income in my retirement. I have one question about selling cover call. If I sell a cover call at $10 which expire at the end of next month, from now and the end of the month, if the price goes higher than $10 in the middle of the contract, will my shares be called away on that date or at the end of the month?

[@PlaynKoi-Shh]

If I am the Option seller and the underlying stock does not sell. Do I just rinse and repeat to infinity, if I am happy to hold the asset (index fund or other) for the long term? Or do I need to watch out if price drops as that would incur a loss at the next option?

[@coocoocachooglin]

[@vg6940]

Hello, how does one choose a strike price? I’m about to do a covert call with a Lucid and I don’t know what I should choose as a strike price? I really don’t want to sell my shares if I don’t have to.. this is the confusing part for me

[@danknastypumps3333]

can the stock be in any sector? should its trading volume be comfortably high?

[@WhiteOakFX]

Have a question. If the price of the stock rallies above the strike price or up from where you originally sold the option, you would also take a loss on the option. Isn't this correct. Not only you would have to sell your stock at the strike price but your option would be at a loss, you would have to buy it back more expensive. Am I missing something?

[@SleepingMe]

If the stocks market price goes up above strike price before the expired day, can you directly sell your stocks in the "market price" if your stocks' cover call haven't been called yet?? Is such case , and the what is the consequence afterward?? If after you sold your stocks at the market price then people's call your stocks later??

[@xkrimzonxrsps]

The 46$ premium is it including the greeks. Do we get the greeks premium? Is the 46$ the stock price spread from market-strike? If we write an option and someone takes it and then re sells it and so on until the strike and the guy doesnt excercise do we get the shares back or does the last option holder get the shares? If i cant buy the shares from call thats ITM can i take his shares sell them then replace it or i only have to sell the contract. Im gonna think of a few more questions then watch the rest of the video.

[@fnazia]

I have a question if i sell covered call for stock A for 100 strike price but on the day of expiration the stock A is 80 can i still sell my stocks at 100.I want to execute my stocks will it happen automatically?

[@FeliciaTheblessedWest]

Thanks for this. I have a CC going now with a expiration date 6/30 but it’s not going in my favor so far🤦🏽‍♀️

[@thomasd5488]

Conditions can change a lot in the next 17 days. If "not going in your favor" means the CC is in the money, just monitor the EXTRINSIC portion of the option premium, by looking at an option chain, of the same strike and expiration date, for a put on that stock. The premium on an out of the money put is ALL EXTRINSIC value. That will be the approximate EXTRINSIC value in your CC option premium. If the EXTRINSIC value falls to 10 cents or less, if it were my CC, I would ROLL the CC up, one strike at a time, and out to an expiration, out far enough to earn a small net credit, to avoid early assignment.

[@leetzod]

Given your previous videos where you sold covered calls on Spy, I'm currently considering the possibility of selling covered calls on the Nio stock. I'm curious to hear your thoughts on this matter. Alternatively, do you tend to avoid stocks like Nio due to their potential lack of liquidity?

[@thomasd5488]

What are you talking about? NIO has TONS of daily stock volume, AND TONS of option volume and open interest. The reason I wouldn't own shares of NIO, is because the all time high was $64.13 on 1/12/2021, and the stock chart has looked like a down escalator ever since. NIO is currently trading for $8.75 I hope you haven't owned it for very long. You would be, or will be underwater. Don't tell me you believe it has potential, in the future, to go to the moon. "Trade what you SEE, not what you THINK." Quote from Markus Heitkoetter, on KZbin

[@NicksDynasty]

Thank you i hope to start this by the end of the year. So since you are "covered" there is no loss? just missing out of appreciation?

[@AverageJoeInvestor]

Depending on the STRIKE PRICE you choose you limit potential capital appreciation but you also DO CAPTURE CASH flow. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@thomasd5488]

As long as your strike price is equal to, or greater than your purchase price of the shares, you have no loss, other than the POTENTIAL future appreciation above the strike price.

[@pertainedorangeman3056]

What are your opinions on covered call ETF like JEPI and JEPQ? I know I could save money writing the calls myself but I don't mind paying someone else to do it for me. Any other considerations for CC funds vs doing it myself?

[@mycasualworld]

i was hoping you would go into SELLING A COVERED CALL with a Strike below market (ITM). Just trying to wrap my head around that.... i understand it is similar to selling a put.

[@johnc2415]

what do you think selling covered calls and cash secured puts on ARKK? the cost of ark is low relative to SPY which makes it more accessible if you have less capital to work with.

[@RC-lc6ph]

oark...

[@johnnyfive1412]

What if you own more than 100 shares of a stock. Which blocks would get assigned if you had 125 share (bought at different prices) of a stock for which you sold a covered call? Would FIFO apply in this case?

[@clehaxze]

It does not matter. To the broker and exchange, you have 125 shares. Which "block" is your own mental math that you have to do yourselves.

[@nathanludwig2562]

what is the point of a platform giving you the break even on a sold option if you said if its 1 penny above strike price on expiration the contract will be assigned. Do you also know why the break even is different for buying vs selling calls? Thank you!!!

[@entertainmentinternational1087]

Im in mara calls making 400 a week and in alot of pltr covered calls collected 7500 this week 6k last week and so on.. its great when ur near or under ur average.. my average is 19.35 and strike is 16.50..so i have to be on top of it especially friday 15 min before close incase i have to roll the contracts.. but if i can keep making this much premiums for months until it passes my average it wil be amazing to make 20k to 25k a month while i hold.. wow imagine 4 months of 25k in premiums

[@maxreynoso]

Great video! I’m actually in a little bit of a pickle right now and this video was perfect but I do have a question. It’s not financial advice but I would love to know what you would do. I sold a TSLA covered call that got away from me this week when TSLA shot up! I sold the 6/16 $230 call. The strike price is away in the money now and I do not want to lose my shares. Would you just buy the contract and take the big lost? Do you roll it over but I’m afraid that I will be stuck rolling it over and over then be screw at the end? Any advice will help. Thank you and love the channel.

[@AverageJoeInvestor]

If SELLING THE SHARES is a non-starter then if it were me I would just BUY IT BACK and take the loss. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@thomasd5488]

My personal goal, is to NEVER accept a loss, if not necessary. Your situation is not as bleak as it first seems. This is not financial advice for you. This is what I would do, if I was in a similar situation. Using a two legged trading ticket, I would ROLL the TSLA strike up, one strike, to the $232.50 strike price, and out to the $6/30 expiration for a net credit of ~ $1, That trade is an annualized profit of 10%, on just the option premium gained, but does not include the annual profit gained by raising the strike price from $230 to $232.50 1) BTC 6/16 expiry, $230.00 strike, approximate debit of $24.98 2) STO 6/30 expiry, $232.50 strike, approximate credit of $26.12 Total net credit = $1.00 to $1.14 As you near the new expiration of 6/30, if the strike is STILL in the money, rinse and repeat the ROLLING process up, to the $235 strike, and out to a far enough expiration that earns a small net credit. Keep rinsing and repeating until the strike is out of the money. You get PAID to raise the strike price, one strike at a time. You get PAID to continue to participate in share price appreciation. (a little delayed of course) You get PAID to keep your shares, by avoiding early assignment. You get PAID each time you roll, creating additional income. Sounds better than rolling all the way up for a huge loss, IMO. Warren Buffett is quoted as saying, "The stock market is a device, to transfer money, from the impatient, to the patient. Conventional wisdom teaches you to roll up for a loss. That is an example of impatience. Rolling up, one strike at a time, and out just far enough to earn a net credit, is an example of patience. A small profit, is LARGER than a huge loss.

[@maxreynoso]

@@thomasd5488 this has to be the BEST educational advice I’ve ever gotten about options! Never had I seeing it this way. But now it makes perfect sense. The hope is that the prices will eventually comes down from all this hype to the point that it’s OTM correct? Can I close my position before expiration?

[@thomasd5488]

@@maxreynoso The share price doesn't have to come down, for your strike to eventually become OTM. At each roll, you will raise the strike price, one strike at a time, for a net credit. Eventually, you will raise the strike price up, to meet the share price. Even after you get the strike price to "at the money", you can continue to roll up, one strike at a time, to become out of the money. If the stock trades sideways for a while, you don't have to roll up, once you are already OTM. You can just roll out to a farther expiration, to continue earning premium. ROLLING can be viewed as a long term campaign, instead of a "one and done" strategy.

[@maxreynoso]

@@thomasd5488 so this move has not only kept me from having to sell my share but I’m collecting premium every single time! Why not make this move more often? Why not sell a DIM put about a month out, and just do this play every week until the stock either drops or your put reaches the stock price? It seems to good to be true so my question to you is whats the wrong that can happen with doing this over and over?

[@barelyadequate9453]

What happens if the stock price is the exact value of your option when the contract expires. Do you get assigned on your covered calls and cash secured puts?

[@thomasd5488]

Yes, if the share price is the same amount as your strike price, or any amount that is "in the money", AT EXPIRATION, you will most likely get exercised. Shares taken away, if it is a covered call. Shares added to your account if it is a cash secured put.

[@antimatter2380]

When you have enough for 2 calls on the same stock, is it generally better to sell both at the same time for the same date, same time but different dates, or ladder them 4 days apart if strike date is 8 days? Oh, and could you do a more in depth on buying back the call? Got a little lost on that.

[@Agratefulman]

Hi Joe, Your previous video detailed the strategy of selling covered calls on SPY over 20 years. Are you doing this particular strategy in your $15 membership?

[@AverageJoeInvestor]

Hey there, YES I do break down all of my specific trades which includes my SPY strategy. The only difference is that I am also writing Cash-Secured Puts in my SPY holdings. THANK YOU for watching and for leaving your $0.02 in the comments! =)

[@leegoodman8553]

Joe, Please have a look at the covered call ETF that buys calls and qualified dividends. SPYI

[@teok6585]

If I bought stock for $70 and sold the call for $3.25 strike price at $75, I would collect a $325 premium. and the expiration day the stock went over for $78; well in this case I collect a premium($325) plus $5 for 100 shares is $500 total is an $825 gain if I get assigned I am not losing money because I sold stock at $75 I just capt out for more profit, you don't think so is safer less risk?

[@ryldauril2228]

im loving my OSCL stock sad i cant sell covered calls on it for any premium same with RYLD alot of etf you cant sell CC for anything meaning full but i got the for dividends and long term gain what i really wanna do is doing a wheel on IWM,

[@RC-lc6ph]

Ditto.

[@steveshadoff8477]

Going to take notes on this one. Aren't there any ETFs already doing this? Or ETFs implementing wheel strategy?

[@RC-lc6ph]

QYLd, xyld, ryld, tsly, aply to name some of the buzzer names.

[@roberts8134]

To add to 5150 RC's list: DIVO, JEPI, QQQX. I'm sure there are more. Edit: NUSI too, although it's track record is horrible. None I know of do wheel strategy.

[@steveshadoff8477]

@@RC-lc6ph those ones do covered calls. Don't think they do the wheel strategy.

[@bobbyp610]

Can you please do a video on Poor Man’s covered calls - and your take on that strategy

[@Samuel-Andrade]

My dude, do you have any book recommendation for read how to operate with options? some easy for read, im start to investing 4 months ago, so i'm trying to read a lot of.

[@AverageJoeInvestor]

Hey There! Here are a few books I've read along the way that have been helpful: THE OPTION TRADER'S HEDGE FUND, COVERED CALLS FOR BEGINNERS and GET RICH WITH DIVIDENDS (Which includes a section on writing covered calls on dividend stocks). THANK YOU for watching and for leaving your $0.02 in the comments! =)

[@Samuel-Andrade]

​@@AverageJoeInvestor THX!!! i already read "GET RICH WITH DIVIDENDS", Now im reading "Vivir de las rentas" of Josan Jarque.

[@Samuel-Andrade]

Man @@AverageJoeInvestor , if i can give you another LIKE for the video, i will do it! hahahah, the next month i will start to make covered calls for a little stock only for training, the premium for the call is only 1 dollar minus fees and taxes, like 0.3 cents for every contract, but will by a good experience for start. thanks for share this content with us, greetings from chile . And sorry for my bad english hahahah

[@Karmaghna]

Understand everything except the concept of time decay and buying to close the option before expiration date. Please consider doing a more in-depth video on closing a covered call option early for dummies like me.

[@roberts8134]

==Time Decay== Someone once said that in the short term, the stock market is a voting machine, and over the long term it is a weighing machine. Most options are short term. That means the price movement of any stock, short term, is somewhat unpredictable. Any piece of news could trigger a big price swing either way (and you can't predict which way, really). The longer an option has, the more time/odds for one of those swings to happen in the buyer's favor and the BUYER can make money (or more money). Basically, the odds the buyer makes money go up with more time until expiration. Higher odds of the buyer making money make the option more valuable. On the flip side, the shorter the time an option has left to expiration means the odds of the buyer making money decrease because there is less chance for one of those price swings to happen in the buyer's favor. Remember, at expiration, if not exercised, the option's value becomes to 0. That is the time decay. ==Buying to close== When you sell a covered call, you are putting up 100 shares you own as collateral. But what you can do is pay someone else to, for a price, put up their 100 shares as collateral instead of yours. This buying to close. Since you no longer have any risk of your shares getting called away, for you, the contract you sold is over and closed.

[@moewilson168]

But Joe, how do I get approved for covered calls. I have Fidelity and I’m not eligible for covered calls. Is because I’m new or not enough money???

[@WWJPD]

For Fidelity, you have to apply online, but it's easy and it took less than a day to get for me.

[@piggelbos]

I have qyld doing this for me. Is there an advantage in doing this myself instead of qyld that has a 12% yield?

[@gandmemoney]

I believe the payout is double and you get the dividend. Don’t write a contract on earnings week or dividend week. Good luck. Joe did 22% last year because of covered calls

[@AverageJoeInvestor]

QYLD swings toward more MAX CASH FLOW and struggles to generate ANY Capital appreciation. I find it very easy to replicate the cash flow of QYLD and generate cash flow. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@kevinr8431]

What do you do when the stock you’re using plummet and value and ends up wiping out like a years worth of gains

[@knightwriter2989]

Covered calls can do FAR MORE. You can roll up/out a call if the price doesn't go your way. If the price of the stock DOES decrease, you can sell yet more calls and reduce your cost basis until the stock recovers. If you know what you're doing, it's hard to lose money with this strategy. But, you need to know what you're doing.

[@codychase9938]

What happens if the option runs out of time and its in the money. Do the 100 stocks just get removed from your account automatically?

[@davidbaldridge8324]

Yes, you will see an entry that they were exercised , and it will be sold at your strike price and the money moved into your account.

[@AverageJoeInvestor]

Yes, just like David said it will automatically occur and you will see the assignment and sale of the shares in your activity. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@UsernameOG0]

@@AverageJoeInvestordo you lose the premium you initially collect if the stock expires in the money?

[@bradprestbo1734]

What is the formula to determine an appropriate strike price?

[@clehaxze]

There's the black-sholes formula to calculate the theoretical value of any option. But it's complicated to use. Personally, just sell calls at a strike that you are comfortable the stock won't reach in the given time frame. And weight your risk of making less money against the premium

[@thomasd5488]

Personally, If I only want to earn income, and have very low risk of exercise, I use a delta of .20 or less. There is so much more to this than strike price, or the amount of premium received. For the wheel strategy, I use a covered call strike price that is approximately 1% above the current market price of the shares. If my put strike of $106 just got assigned. and that is my purchase price, I would sell a weekly, $108 covered call. If the call strike expires in the money, I would get $2 per share of stock price appreciation for a 1 week trade. I would also get a very good premium. Put the two together for a one week holding period, and that would translate to a fantastic annualized ROI. Rinse and repeat with a slightly out of the money cash secured put, to start the wheel all over again. If the $108 call strike expires out of the money, and does not get assigned, then sell another covered call for another premium.

[@kevn99]

Suppose the strike price is reached after 2 days but tanks back down and stays down past the 8 days? Then what? I have watched 10 different videos but have yet to hear that scenario explained.

[@CorySanders-xk5it]

Makes sure you check your portfolio for the high volume stocks as those are the ones you want to execute the cover calls on. More meat on the bone so to speak.

[@entertainmentinternational1087]

He must of been so far past the strike price... shoulda rolled it... but if ur shares were called away at the strike u choose then you should of made premiums and all the money above ur strike price..

[@RadiumHypochlorite-xd6ed]

I dont understand how this is a good idea. Everytime i buy a covered call i lose my shares and they sell and then i have to buy them back for more money. What am i doing wrong?

[@Zombieland318]

What’s your favorite stock for covered calls ?

[@AverageJoeInvestor]

If I had to choose JUST ONE investment right now it would be SPY. That being said I have a few different positions but stick to dividend stocks outside of SPY currently. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@michaelwang1730]

Actually you will lose if the price of stock falls too low, as the option premium will not be enough to cover the loss in stock value.

[@timothybancroft6579]

I am confused? I am sticking to what I know

[@Duke_of_Prunes]

You and me, both, brother!

[@AverageJoeInvestor]

That’s OK. Nothing wrong with keeping it simple. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎

[@thomasd5488]

Where would you be, if that were your philosophy, for everything in your life? Did you know how to drive a car, ride a bike, walk, BEFORE YOU LEARNED? Did you know how to do your job, before you learned? The list of things you had to learn would be endless, and I think you get the point. I knew NOTHING about selling covered calls and cash secured puts, when I started buying stocks in June 2020. Stock growth was like watching trees grow. I didn't have 20-30 years to wait that long. Don't give up. Keep learning. It will be worth it. Just like everything else in your life that you learned.

[@StevenSchoolAlchemy]

Ehh, I dunno

[@dancovrboski9135]

Paid bez edənə. Leetat ko samoviskite lepi damı bitonot

[@unknownunknown-ni1ns]

Understanding that a contract isn't a bet is the first step in actually knowing what your talking about and not being an idiot on KZbin just for clicks

[@BlackMath69]

if you're risking 11k for a $46 dollar premium you're doing it wrong

[@thomasd5488]

You have a point, but keep in mind, this example is for illustrative purposes. It is not a recommendation to trade. At the time he made this video, XOM was trading at $108.43. His purchase price was $108. He was showing what the premium would be with a $112 strike price. If It were to expire in the money, the seller would have earned $4 of share price appreciation. $4 capital gain, plus $.46 option premium =$4.46 x 100 =$446 $446 gain on an eight day trade with $10,800 collateral, is an annualized ROI of 188.4% I personally would have gone after a larger premium, and less capital gains, by using the $109 or the $110 strike price.

[@MC-gj8fg]

Background: I'm currently holding a like amount in both SPY and VOO in my IRA, and am selling covered calls on SPY. The purpose is to compare the two and determine, over the long run, if I can accelerate returns by selling covered calls on SPY compared to simply buy and hold with VOO. I have no intention of withdrawing the money from either underlying for 15 years. Something that I rarely hear spoken about is the optimal method to manage covered calls under these long conditions when the share price begins to test or even exceed the strike. I underwent an example of this the other day when SPY shot up. I rolled the contract up and out, but took a small loss to accomplish this. You may say "but you didn't lose anything because stock appreciation," but remember we're comparing selling covered calls to buy and hold. VOO and SPY both appreciated, but only in SPY did I collect less premium than it cost me to roll the position. I accept that this will likely happen from time to time, but where the question comes in is "how do we know when, or if, to roll rather than hoping the price will come back down or allowing the shares to be called away and simply rebuying them?" There is no way to predict the future, but is it reasonable to assume that there's historical data that can allow us to make decisions with the most favorable expected value? This is a complicated question that nobody addresses in any covered call youtube video, book, etc I've ever seen. If the share price tests the strike early in the contract I'm sure there's a different answer than if it's later with less time value. If we roll every time the share price gets close to the strike we will very frequently be giving up much of the premium earned in the roll, or taking a net loss if we roll after the strike has already been exceeded. Since we're rebuying the stock, the loss would be much more substantial if we have to do that rather than simply absorbing negative premium and rolling, but then again the stock price might drop back down. This is a game of decision making under conditions of uncertainty that I feel as though I have insufficient data to play for a favorable outcome. Do you have any thoughts on how you would manage these positions under these circumstances?

[@thomasd5488]

You need to learn to ROLL correctly. You should never have to roll for a loss. Stop following conventional wisdom, which tells you to roll all the way up to an out of the money strike, for a loss. When you have a deep in the money covered call, use a two legged trading ticket to roll up and out, so these two trades occur simultaneously. 1) buy to close the currently owned in the money covered call for a loss. 2) sell to open a new in the money covered call, one strike price higher, and out to an expiration date that is out just far enough to earn a credit that is LARGER than the cost for buying to close the old covered call. This creates a small profit for rolling. Do NOT get greedy, and attempt to get a larger net credit by going out even farther in expiration. Trying to keep the expiration dates as short as possible is more important than getting a larger net credit. Your new covered call, with the still in the money strike price, is not likely to get exercised early, as long as you monitor the EXTRINSIC portion of the premium, and ROLL it up and out again, ANYTIME the EXTRINSIC value of the premium falls below 10 cents. This becomes a long campaign of ROLLING up one strike at a time, and out farther, for a net credit, for as long as the strike price remains in the money. This is like walking up a flight of stairs, one step at a time. Eventually, you get to the top, and get paid at each step, on your way up. You are getting PAID to increase your strike price at each ROLL, which allows you to continue to participate in share price appreciation. There are very good reasons for doing things the way I have described, but explaining those reasons here, would create a book sized comment.

[@MC-gj8fg]

@@thomasd5488 Thanks for the feedback. I've been rolling up and out as SPY shot up over the last week, and finally bought to close out of the position today. While I was rolling, I was getting a net debit even though the share price was still slightly below the strike, likely due to an excess of time value. I likely could have rolled in such a way as to create a net credit, but this would have been at a high delta strike price not much higher than my original strike. Were the market to continue to rise as it did, I was just kicking the can down the road and could (and would) have had a much larger problem as the share price would have substantially shot past my strike where the net debit to roll would have become unavoidable and much higher. I may be doing something wrong, but I cannot determine what.

[@vinnyh8754]

Confuse