Covered Call Writing Doesn’t Leave You Naked

Employing the covered call strategy will reward you with wealth build-up you have always dreamed of.

For those who doesn’t know what covered call is, it is the process of selling an option that allows

someone to purchase a specified number of shares of a particular financial instrument (stocks of bonds)

from you at the share price specified in the call anytime before the specified expiration date of the call.

The covered call writing process means that you actually already own the financial instrument that you

are writing as opposed to you having to buy the instrument on the open market, if the buyer of the call

chooses to exercise it. Covered call writing is often used by professional traders to lock in profit on

positions they own and not ready to sell. Since by engaging in covered call writing the trader receives a

premium for writing the call the position stay profitable as long as the prices does not drop more than

the premium the trader received for writing the covered call.

Covered call writing can also be explained as a term that means two transactions take place and is an

investment strategy in the financial industry. Another term is called a "buy-write" transaction because

again, you are having two processes take place in transaction. A person buys or owns a stock and then

sells a call option against that very same stock. In other words if you have a stock that's worth $25 and

you tell your broker you are willing to sell your call option at month's end if the stock reaches $30 and

the call option that particular day is selling for $2, if you have 100 shares you earn $200. If at the end of

the month the price reaches $30 you sell and will receive the money you gained. If the price goes down

or doesn't reach the requested amount then the sale of the call option is meaningless and does not

occur because it did not reach the required amount for the transaction to occur.

Seriously considering putting an investment using the covered call strategy is are great if you want to be

able to invest your money on a professional level and not into some scam that mostly is all that you will

ever find in dubious websites. The credible ones show you exactly what you need to do when you want

to plan your financial future and you do not want to just keep your money in the bank because it will

just lose its value over time. If you have ever taken an economic class than you know that inflation

makes the value of your money less over time and something that costs one hundred bucks today may

cost one hundred and ten dollars in twenty years. This is why you want to look into one of these smart

investments here that are great for getting you a slow and patient return that will make you happy.

Information Source: BornToSell