Has anyone had any experience in writing covered call options? I am interested in learning how they work.

September 10, 2007

Posted by TonyLiu

( 3 ratings )

I have been trading option for years. The most important lesson to learn is that you need an overall trading strategy, whether it be using options or not.

To get you started:

"The covered call is a strategy in which an investor writes a call option contract while at the same time owning an equivalent number of shares of the underlying stock. If this stock is purchased simultaneously with writing the call contract, the strategy is commonly referred to as a "buy-write." If the shares are already held from a previous purchase, it is commonly referred to an "overwrite." In either case, the stock is generally held in the same brokerage account from which the investor writes the call, and fully collateralizes, or "covers," the obligation conveyed by writing a call option contract. This strategy is the most basic and most widely used strategy combining the flexibility of listed options with stock ownership."

This strategy has a lot of risk with limited potential. Keep learning...

Sources:
http://www.888options.com/strategy/covered_call.jsp

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