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A Covered Call is simply buying Stock and then Selling a Call Option to produce income.
It is called 'Covered' because, if the option expires 'In The Money' (ITM), then the stock would be 'called away' from
you, hence the contract you sold is 'covered', but you get to keep the premium you got by selling the call, thus
producing income. Many people have, for years, used covered calls to generate nice rates of return on
their portfolios and this method can be used in most retirement accounts. You may want to first learn more about options
in general before undertaking a covered call strategy, if these terms or concepts are new to you.
Steps for Managing a Covered Call
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While Covered Calls are easy to get into, they can sometimes be troublesome to get out of profitably
in the event of large stock price movement. This is where many people make mistakes that can lead to big losses instead
of the desired profits.
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For my own Covered Call trading, I have distilled the possible outcomes of Stock Price
movement over Time while in a Covered Call trade into several Steps that I follow like a Blueprint or a Checklist to guide
me for the best chance of a positive outcome. This guide coupled with patience and, sometimes, a little judgement, has
been giving me great results and peace of mind.
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