Investing Strategy: Covered Call ? Facts You Must Know | Self ...

Posted on January 30, 2012 by blogger

Experts usually tell everyone that you will need to invest some of your unused money securely and properly. Let your money work for you so that you can enjoy life to the fullest. But when folks get the chance to invest, many people turn this offer down since they are not fully aware if all their time and efforts will be worth it. Not everyone knows how powerful investments are and how to run and keep their money well. Many successful investors believed that investing is worth the risk and every penny. One particular investment that many experts wanted to get their hands is covered call.

Hearing covered call for the first time really lets you?re thinking that of direct calls to and from the US or other countries. Well, this is not your ordinary telephones or all about making phone calls. Covered calls is one of the investment strategies that experts used. You aren?t getting rich quickly in this type of investment. This is one of the income oriented approach that focuses your hard earned dollars to progress slowly.

What are the items that you need in write a covered call?

The first thing that you should have is a brokerage account. The next you that you should have is a permission that qualifies you to writing covered calls. There are brokerage accounts that will allow that user to write covered calls while there are accounts that needs you to fill and complete some forms first before you could write and sell calls. You also have at the very least 100 stocks or if you don?t have one, you need to have the cash to buy them. The last but not the least is your portfolio and trade selection services.

In this kind of investment, you get to use terms like long and short. The term long means that you gain profits every time that stocks you purchased raises its value. Short in the other hand is to sell some shares that you didn?t own. Investors usually use short if they think that the value of that specific share will depreciate or decrease. In the long term, the investors will have to buy that share they sold for a lesser price. This is usually where investors get their profits.

For a covered calls investing, you get two options which are calls and puts. When talking about call option this gives the buyer of that specific call share the right to buy the share for a specific price which is called strike price before a certain expiration date. Just like with other investment opportunity, this too has its own risk and failures. Make sure that your in a position to know all the risk and how to go about this kind of investment.

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Source: http://www.pwconservative.net/uncategorized/investing-strategy-covered-call-facts-you-must-know

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