You Must Read This Report If You Are Considering Selling Covered Calls

I am continually amazed that many retail investors simply don't understand the concept of generating extra cash from their stock positions. People look at me like I am crazy when I tell them to utilize covered call options to generate extra income, decrease their exposure to market declines, and establish strict sell criteria. I was introduced to covered calls by several of my clients. They explained the concept to me. The technique of writing covered calls is the only stock option strategy that you can use at most of the major brokerage firms for your IRA investments. This is because writing covered calls is a very conservative strategy relative to other option strategies.
Covered call selling is very similar to selling an option on a piece of real estate. For example, I'll give you $10,000 now if you sell me the property in 6 months at a set price. If I decide not to exercise my right to by the property, you keep the money and we go our separate ways.
With a stock, if I buy 1,000 shares of ABC OIL at $10 and the stock goes to $11 in the following month. I can sell someone the "right" or option to buy the stock from me six months from now at $12.50. For that right or option, the option buyer has to give me some consideration, similar to the above real estate example, let's assume it is .50 per share or $500.
The $500 is immediately deposited into my brokerage account and the corresponding option position shows up on my statement. I must keep the stock for the whole term of the option contract unless I buy back the option on the open market. The option price will change from day to day. Therefore, I typically hold my stocks until expiration.
Six months from now, two things can happen. One, the stock goes above $12.50 and the person "calls" me out of the position, which I am more than happy to do since I bought it at ten. Second, the stock has declined below $12.50 and the option holder is holding on to a worthless option. The option holder would not "call" the stock from me at $12.50 when he or she might be able to buy it in the open market at $11.50.
I then start the process all over again and write the calls again.
Let's examine what I accomplished with this strategy: 1. I hedged my position by 5% or $500 2. I set a strict sell price that I was willing to let the shares go for, $12.50 3. I generated income that I could enjoy or reinvest.
This strategy has made me extremely happy since the stock market has declined. Covered call options helped me to remain profitable even in this recent bear market.
As a reminder, make sure you "know what you own" and consult with a tax professional or adviser before investing your hard earned money!