Covered Calls

[Tellugodu]

Does anyone do this to earn extra income with their stocks? If yes, how much on the average per month. Whats the strategy you follow to minimize the risk? Please throw some light 💡. @Konebhar6

[Konebhar6]

9 hours ago, Tellugodu said:

Does anyone do this to earn extra income with their stocks? If yes, how much on the average per month. Whats the strategy you follow to minimize the risk? Please throw some light 💡. @Konebhar6

Yes I use covered calls to reduce my cost basis over a period of time. I usually use it when the stock I own is overbought. Typically look at technicals. I was able to reduce my cost basis of TXG from $16.39 to $14.2 over last 2 months. 

i don’t do it always, only when premiums make sense. For e.g. OXY I don’t do much CC as the premiums are very less. I did twice but made peanuts. 
 

some times, i just buy a stock and do covered call if premiums are good. For e.g. SYM. 

[vatchesa]

44 minutes ago, Konebhar6 said:

Yes I use covered calls to reduce my cost basis over a period of time. I usually use it when the stock I own is overbought. Typically look at technicals. I was able to reduce my cost basis of TXG from $16.39 to $14.2 over last 2 months. 

i don’t do it always, only when premiums make sense. For e.g. OXY I don’t do much CC as the premiums are very less. I did twice but made peanuts. 
 

some times, i just buy a stock and do covered call if premiums are good. For e.g. SYM. 

Ante for every 100 shares you can sell one CC?

if price over the cc strike unte?

[psycontr]

10 hours ago, Tellugodu said:

Does anyone do this to earn extra income with their stocks? If yes, how much on the average per month. Whats the strategy you follow to minimize the risk? Please throw some light 💡. @Konebhar6

Yes anna ravi telugu traveller earned 25lakhs per month

 

[Pavanonline]

1 hour ago, vatchesa said:

Ante for every 100 shares you can sell one CC?

if price over the cc strike unte?

Buy back or let it expire with sale of stock, so trade with stocks that you are ok to sell in case of huge spike. 

 

[Konebhar6]

4 hours ago, vatchesa said:

Ante for every 100 shares you can sell one CC?

if price over the cc strike unte?

See some YouTube videos on options. Below is a good one. 
To answer your question, you need to own 100 qty of a stock to do CC. I always do about 6 weeks out (expiry date) to give enough time for myself to take right decisions. If the stock drops before the exp date, I buy back the call, netting positive amount. 
 

I also sell a lot of PUTS. Another way to generate income.
 

 

[Konebhar6]

14 hours ago, Tellugodu said:

Does anyone do this to earn extra income with their stocks? If yes, how much on the average per month. Whats the strategy you follow to minimize the risk? Please throw some light 💡. @Konebhar6

If you have good discipline, you can make it a constant income generation model. Both Selling puts and CC. 

[rmJU72]

The risk is mainly that if the stock appreciates much more than the strike price by the time your call expires your stocks get assigned. You still make a profit, but its limited.

Just sell higher than where you think the stock will go to minimize that chance, but of course such premiums will be limited. Something is better than nothing though.

[ganguly183]

I do it occasionally if/when IV is high. Ee year ekkuva cheddam anukuntunna. 

[jpismahatma]

 

There are lot of strategies.

I like

1. selling put and buying call at same strike as at the money. You can hedge the theta. --> Bullish

2. Selling ITM Puts. --> Bullish.

3. Selling OTM Calls mostly covered calls. --> Bearish

4. Sell puts, buy calls at the money and sell call OTM. --> Bullish

[Chittoorodu]

I think this has to come with a big disclaimer

Get into options trading if you are disciplined and know when to take a profit or when to cut losses.

Not all retail traders can be option traders. Also, there may be cases where you've made $1000 on 10 option strategies that month but lost $1000 on one volatile stock.

[*Prince Charming]

7 hours ago, Konebhar6 said:

Yes I use covered calls to reduce my cost basis over a period of time. I usually use it when the stock I own is overbought. Typically look at technicals. I was able to reduce my cost basis of TXG from $16.39 to $14.2 over last 2 months. 

i don’t do it always, only when premiums make sense. For e.g. OXY I don’t do much CC as the premiums are very less. I did twice but made peanuts. 
 

some times, i just buy a stock and do covered call if premiums are good. For e.g. SYM. 

Whay are covered calls ?. Kudirte oka line lol cheppu or google cheskomante chestaa

[Konebhar6]

1 hour ago, *Prince Charming said:

Whay are covered calls ?. Kudirte oka line lol cheppu or google cheskomante chestaa

CC - you are lending  shares you own ( say AAPL) to someone until an expiry date (  say 2/21/25) at a Strike price ( say 230). You collect a premium ($7.5 meaning $750 for 1 contract) for doing so. On expiry if price stays below 230, you get to keep all premium reducing your cost basis by 7.5/share. If it goes above 237.5 you will lose your shares. But u still made profit. You sold shares at 237.5 including premium.

Watch the video. It takes time to understand these concepts. 

[*Prince Charming]

21 minutes ago, Konebhar6 said:

CC - you are lending  shares you own ( say AAPL) to someone until an expiry date (  say 2/21/25) at a Strike price ( say 230). You collect a premium ($7.5 meaning $750 for 1 contract) for doing so. On expiry if price stays below 230, you get to keep all premium reducing your cost basis by 7.5/share. If it goes above 237.5 you will lose your shares. But u still made profit. You sold shares at 237.5 including premium.

Watch the video. It takes time to understand these concepts. 

Will watch it. Thanks 

[rmJU72]

2 hours ago, Konebhar6 said:

CC - you are lending  shares you own ( say AAPL) to someone until an expiry date (  say 2/21/25) at a Strike price ( say 230). You collect a premium ($7.5 meaning $750 for 1 contract) for doing so. On expiry if price stays below 230, you get to keep all premium reducing your cost basis by 7.5/share. If it goes above 237.5 you will lose your shares. But u still made profit. You sold shares at 237.5 including premium.

Watch the video. It takes time to understand these concepts. 

technically it’s not lending. you are just writing a contract saying you will sell the shares to someone if the price hits a certain number. you get paid for writing the contract.