Options trading covered calls

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Bankrate principal writer and editor. PARAGRAPHOur writers and editors optionss the stock rises too high repurchase the call option for less than you paid and money that otherwise would have if you prefer.

Top multi-leg options strategies for advanced traders Investing.

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Covered Calls Explained - The Cost of Income
A covered call is an options trading strategy that involves two main components: owning the underlying asset and selling call options against it. A covered call combines a long stock position with a short call position, and is a common strategy deployed in slightly bullish or sideways markets. A covered call gives someone else the right to purchase stock shares you already own (hence "covered") at a specified price (strike price) and at any time on or.

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Investors lower their cost basis in the underlying stock by receiving the premium from selling the call option. The premium you receive from the covered call can help offset some of those potentially realized losses, though certainly not all, as you saw in the example. Summary: This article provides a comprehensive guide to using covered calls for generating additional income with Apple AAPL shares. The potential gains you could miss out on are hypothetically limitless, meaning a covered call probably isn't the right strategy for investments you're extremely optimistic about. Please note that throughout this example, we do not take into account any commissions, fees, or taxes that may apply to transactions.