Selling Covered Calls Tips - How much Money can I Make Selling Covered Calls for Monthly Income
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⏰Chapters ⏰
0:00 Intro
1:15 Covered calls explained simply (Example WPC)
2:06 Selling Covered Call Tip #1 - Sell covered call options on dividend stocks
2:56 Selling Covered Call Tip #2 - When is the best time to sell a covered call option
4:57 Selling Covered Call Tip #3 - What strike price should you sell a covered call option at
5:14 How much can you make selling covered calls
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In this video I’m going to share with you how much money you can make selling covered call options. I’m also going to give you some tips to help you make better decisions when you’re selling covered call options. By the end of this video you will have a better understanding of how you can use covered call options to generate awesome cash flow every single month!
Selling covered call options against stock that has been assigned to us is one of our favorite ways to generate cash flow in the stock market. I’m going to share with you several little-known tips you can use to consistently generate cash flow every month on your covered call option positions. And stay tuned in until the very end where I’m going to share with you how you can find information on the best way to roll your covered call options!
Here you see an example of a covered call position we are in right now in WPC. We paid $70 per share for the stock. To turn this into a covered call, we sold the March 19th $70 call options. We were paid $1.26 per share for those call options. If you look at the column to the left of that, you see those options are now only worth $0.49 per share. The first tip I’d like to share with you when it comes to covered calls is, consider doing covered calls in dividend paying stocks.
But how do we know when it’s the right time to sell a covered call option? Here is another stock that we have a covered call position in, that’s the CME group. The question is, if you owned this stock already is it a good time to sell a call option in CME? The answer is absolutely! Let me show you why.
So you should be able to get around $6.35 per share for selling that covered call option. If you bought CME stock at its current price of $206.68, that $6.35 would pay you a 25.5% annualized cash on cash return! That’s a pretty good return.
But let’s say that you did not want CME to be called away from you and your goal was to just pocket some extra cash but keep the stock,. What strike price should you sell your covered call option at? Let’s go back to the chart. It looks like the next area of resistance would probably be where the white line is up top, around the two previous highs from July 2019 and February 2020.
When you’re doing covered call options you just need to decide if you’re OK with the stock being called away from you or if you'd rather that not happen. You get more for the covered call if you sell it closer to the current stock price, however if you don’t want to sell the stock then you’re better off selling covered calls at a strike price just above the next highest resistance area and preferably 7% to 10+% out of the money.
Happy investing!
Randy Perez
Disclaimer: I am not a financial planner and am not offering investment advice. This is an opinion channel only and should not be taken as any form of financial advice. I receive a small commission from the purchase of any item from using the links listed above. There are financial risks involved in taking on any monetary transaction that I discuss in my videos.
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