Trading options covered call

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Are you excited about the long-term prospects of a security, but worried that its price might stay the same or fall in the short-term? If so, you may want to consider selling a covered call.

How to sell covered calls - Fidelity Investments

Selling a covered call obligates you to sell your stock at a predetermined price strike price in return for a premium you receive. While the covered call option strategy may help generate income it does not provide full downside protection and may limit profit potential. Why would you want to limit your potential upside? Maybe you feel that you have an opportunity to generate income from the premium and you are comfortable selling your stock at the option's strike price. Or you believe that in the short-term, the security will either fall or remain flat.

The highest payout on a covered call likely occurs when the option is called away, meaning you end up selling your security at the strike price.

In that case, you keep the premium plus any price appreciation up to the strike price on the security. You think the price will remain relatively stagnant in the near term. In addition, you will be able to keep the premium as well as the price appreciation up to the strike price.

In that case, the option expires as worthless and you get to keep the premium. The primary risk of a covered call is limited upside. Using Cash-Secured Puts to Help Generate Income. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product, or an endorsement or affirmation of any specific investment strategy.

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Consult with your tax advisor for information on how taxes may affect the outcome of these strategies. Keep in mind, profit will be reduced or loss worsened, as applicable, by the deduction of commissions and fees.

How to increase retirement income with covered calls - MarketWatch

The covered call option strategy may help generate income and offer limited downside protection, but does not provide full downside protection and may limit profit breakout daily forex strategy. Buying puts trading options covered call be an effective strategy to help protect your financial assets in a market downturn, however there are risks.

There are a variety of education savings accounts available to help trading options covered call the cost of higher education, each with distinct advantages. Using long calls as an option trading strategy can help you turn a larger profit if a stock price increases. Mathematical operations binary numbers, it may result in the loss of the premium. Any specific securities, or types of securities, used as examples are for demonstration purposes only.

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Covered Call

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Covered Calls Explained | Online Option Trading Guide

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