How to Make Money by Writing Covered Calls ?

The stock market is a great and an efficient place to make money and if you own stock you can make even more by writing covered calls.

Step 1
A covered call can only be written if you actually own stock in a company. Stock options on the other hand can be bought and sold by anyone who is interested in trading . Stock options are much more of a high risk than writing a covered call. Because you have more money invested in a stock the risk goes down. While your potential earnings may not be as high, the chance of losing your whole investment is highly unlikely. So to start writing covered calls it is important to research a stock that you would like to invest in.

Step 2
Once you have found a stock, and have purchased at least 100 shares of the lot, you are ready to start writing covered calls. For every 100 shares you own you can write one covered call. By selling a covered call you get to keep the premium instantly when you sell it. It gives the buyer the choice to exercise the option and buy your stock for the strike price that you have set. So if the stock sky rockets, they still only have to pay the strike price.

Step 3
The type of stock that would be a great money maker for writing covered calls is one that stays flat. If a stock hardly moves you can write a covered call and collect the premium, and if the stock doesn’t move they will not exercise their option. So this way you will get to keep your stock and collect a premium from the stock option you are selling. If you own thousands of shares this can be an incredible income.