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Showing results for tags 'option trading'.
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Hi All, I am going to talk about what is covered call strategy and when to use the same. Covered Call is a strategy in which an investor sells a call option on a stock he owns. In this strategy, the investor generally sells an Out of the money call option (Strike price > Current market price). The call would not get exercised unless the stock price increases above the strike price. Till then the investor in the stock (call seller) can retain the premium with him. This becomes his income from the stock. This strategy is usually adopted by a stock owner who is Neutral to Moderately Bullish about the stock. Writing out-of-the-money covered calls is an excellent strategy to use if you are mildly bullish toward the underlying stock as it allows you to earn a premium which also acts as a cushion should the stock price go down. So if you are planning to hold on to the shares anyway and have a target selling price in mind that is not too far off, you should write a covered call. Happy Learning