Over the weekend, I attended a seminar which approached things a little differently with regards to making profit from the stock markets. It was a seminar on ‘covered calls’.. selling them in fact and making money selling the options and owning the stock. Although it was an introduction to a system, there was a lot of food for thought.
To put it simply, it’s a bit like buying a property and renting it out but in terms of the stock, you buy the stock and rent it out. The concepts are essentially that and through the rent, you make your money back.
The technique is basically to buy the shares… you need to buy in blocks of 100 and then write a call option.. which means to sell an option. The option provides someone the right to purchase your block of shares for a predetermined price. For providing that priviledge, you charge a premium.
This sounds like a fantastic opportunity and I am going to give it a shot and keep you informed of my progress. The pros and cons are:
Pros
- Takes the emotion out of trading in that you don’t have to be 100% correct with your entry and exit
- You take a profit immediately
- 80% of options expire.. this is good, you want them to expire so you are on the right side of the statistics
- Relatively low risk, slow and steady profits
Cons
- Limited profit, if the stock shoots up, you make only the premium through selling the option
I’m not too great at explaining but perhaps these links may help:
http://www.chdwk.com/who_writes_options.cfm
I am also currently reading:
Tags: covered calls, day trading, makemesomemoney, option premium, option selling, option writing, options express, options xpress, Trading
Recent Comments