Stock Market alternatives, it's not all about day trading....

So this week the stock market is rough. I decided that I would take a different approach and sell some covered calls to generate income. Some of you may not be familiar with covered calls and this seemed like the perfect opportunity to discuss.  

What Is a Covered Call? 

A covered call refers to transaction in the financial market in which the investor selling call options owns the equivalent amount of the underlying security. To execute this an investor holding a long position in an asset then writes (sells) call options on that same asset to generate an income stream. The investor's long position in the asset is the "cover" because it means the seller can deliver the shares if the buyer of the call option chooses to exercise. If the investor simultaneously buys stock and writes call options against that stock position, it is known as a "buy-write" transaction. To learn more you can go to investopedia and learn more. Covered Calls Explained

Now let me try to put it in simpler terms, I went to my broker website and researched option contracts on companies that were $100 a share or less with high volume of option contracts. Then I looked for the option that paid the best premium for the price I thought would suit my needs. I bought 100 shares of that stock and then wrote an option on it to agree to sell my 100 shares for x price at a certain date. The buyer of the contract paid me a premium which was deposited into my brokerage account immediately! For the day I made over $200 on option premiums. I can also make more money off these transactions when they mature. The difference between what I paid and what the contract price is. 

I learned a lot about options and covered calls from The Wealthy Investor, Tyrone Jackson https://thewealthyinvestor.net Check it out if you want to learn more.

Namaste and Trade Another Day,

Michelle