Options selling strategy

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  1. 10 Options Strategies to Know
  2. This options trader has a unique strategy to double money in 2 years
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  4. Selling Puts: % Easy Income Starts With This Options Strategy

10 Options Strategies to Know

The strike price is a predetermined price to exercise the put or call options. For a covered call, the call that is sold is typically out of the money OTM , when an option's strike price is higher than the market price of the underlying asset. This allows for profit to be made on both the option contract sale and the stock if the stock price stays below the strike price of the option.

If you believe the stock price is going to drop, but you still want to maintain your stock position, you can sell an in the money ITM call option, where the strike price of the underlying asset is lower than the market value. When selling an ITM call option, you will receive a higher premium from the buyer of your call option, but the stock must fall below the ITM option strike price—otherwise, the buyer of your option will be entitled to receive your shares if the share price is above the option's strike price at expiration you then lose your share position.

Covered call writing is typically used by investors and longer-term traders, and is used sparingly by day traders. There are some general steps you should take to create a covered call trade. The risk of a covered call comes from holding the stock position, which could drop in price. Your maximum loss occurs if the stock goes to zero.

This options trader has a unique strategy to double money in 2 years

Therefore, you would calculate your maximum loss per share as:. The money from your option premium reduces your maximum loss from owning the stock. The option premium income comes at a cost though, as it also limits your upside on the stock. You can only profit on the stock up to the strike price of the options contracts you sold.


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Therefore, calculate your maximum profit as:. If you sell an ITM call option, the underlying stock's price will need to fall below the call's strike price in order for you to maintain your shares. If this occurs, you will likely be facing a loss on your stock position, but you will still own your shares, and you will have received the premium to help offset the loss.

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The main goal of the covered call is to collect income via option premiums by selling calls against a stock that you already own. Assuming the stock doesn't move above the strike price, you collect the premium and maintain your stock position which can still profit up to the strike price.


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  3. The Ins and Outs of Selling Options.
  4. Traders should factor in commissions when trading covered calls. If commissions erase a significant portion of the premium received—depending on your criteria—then it isn't worthwhile to sell the option s or create a covered call.


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    Selling Puts: % Easy Income Starts With This Options Strategy

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