Joe Renter - Covered Calls: Making your Investments Work

By Joe Renter

Smashwords Edition

Copyright 2014 Joe Renter

This e-book is licensed for your personal enjoymentonly. This e-book may not be re-sold or given away to other people.If you would like to share this book with another person, pleasepurchase an additional copy for each recipient. If youre readingthis book and did not purchase it, or it was not purchased for youruse only, then please return toSmashwords.com and purchase your owncopy. Thank you for respecting the hard work of this author.

You have already made me rich, now letsbecome wealthy.

INTRODUCTION

The first time I wrote a covered call, I wasnervous. I was afraid that Id mess something up. If youve beeninvesting for longer than a year, you know that a mistake can occureasily. You sell too early, buy too late, theres an investigationinto a company that drives its stock down. Then, as I watched theoption unfold over the period of 6 weeks, I thought: This islegal? And, indeed, it is.

A covered call is simply offering someone theoption to buy your stock, at a price that would bring you a profit.The seller really cant lose; if you offer the option, you shouldbe willing to sell the stock at the price offered. Sure, the stockprice may go much higher than the option price, but thats a chanceworth taking. No matter what happens, you keep the premiumearned.

Let me repeat that: no matter what happens, YOUKEEP THE PREMIUM.

If the stock price does not rise to the strikeprice, you still keep the premium that you were already paid. Youdont give it back. It was paid to you when you wrote the option.Its yours to keep.

The premium that you receive is like a goodfaith down payment. Another investor pays you an amount for thepossibility of buying your stock at a future time. Why would anyonedo that? They are betting that the stock price is going to go up.Way up. And by promising to buy your stock at a certain price, theyare hoping they are going to purchase your shares at a price lowerthan the market price. They dont have to have all the money topurchase 100 shares of stock immediately, but they can hold theopportunity to buy those 100 shares until theyre absolutely readyto pay for them.

There are two things that you must do before youstart profiting from covered calls. First, do your homework. And,honestly, the homework is simple. Read this e-book, perhaps do aninternet search on the term Covered Calls, visit the websitessuggested at the end of this book.

Second, youll need to talk to your brokerage,as they will need to grant you permission to write covered calls.This, typically, will involve you asking them to allow you to dothis, and perhaps a short questionnaire. Thats it. Thats allthere is. And if thats all it takes to get started on coveredcalls, it must be simple, right?

And now, on with the lesson!

1. Expiration or Call date this is the date thatthe option expires
2. Strike Price this is the price the stock maybe sold for
3. Premium this is the price by the buyer forthe option