Property owners unite: Using covered calls to enhance your dividend income
This is not investment advice!
Property ownership is life changing for many people. Steemit itself is an introduction to property ownership allowing many people who have little experience as property owners to acquire property from their labor in an economy where most laborers aren't owners.
Dividend stocks are a source of income for people who wish to transition away or out of the cryptoverse and diversify into something less risky. Crypto tokens are high risk high return, but if you hold long term as an investor or stakeholder rather than a short term day trading speculator you might be successful.
What is a covered call?
- Covered calls are a way of trading options with minimized risk.
- In covered call options you own the stock and sell the option (legal right but not obligation) to purchase the stock in the future at a price and date you determine, with a premium determined by the market.
- In summary you can sell the legal right for an unknown buyer to purchase 100 shares at the strike price prior to the expiration date. But you can lose slightly depending on the price movement of the stock, and the potential for profit is limited by the strike price.
A single option, whether put or call, represents a round lot, or 100 shares of a given underlying stock. Call options are upwardly speculative securities by nature, at least from a buyer's perspective. Investors who purchase a call option believe that the price of the underlying stock is going to rise, perhaps dramatically, but they may not have the cash to purchase as much of the stock as they would like. They can therefore pay a small premium to a seller (or writer) who believes that the stock price will either decline or remain constant. This premium, in exchange for the call option, gives the buyer the right, or option, to buy the stock at the option's strike price, instead of at the anticipated higher market price.
So you sell the right to buy the shares from you at a fixed price and set date. The strike price is the price you agree to sell your shares for.
I don't have any property but if I do come into any possession of any land I'll be sure to remember as covered calls as it seems like a great way to trade
With my upvote you are now a property owner.
ohhhh goteeem lol eye like that @dana-edwards . .. allow me to add to your property as well .. . Im new but I see you have great info i also watch boxmining and Ivan. . .Keep it Jazzy and Steemie_^
This is a great article. Covered calls are probably the safest way to get into options. It's way safer than actually buying call options outright. The return may not be as high as just buying options but the income from covered calls can be great additional income.
The only concern about it is that you're trading away potential upside in order to gain additional income now by writing the covered call. If the price of the stock rises above the strike price you selected and the option you wrote gets exercised, you can potentially lose that additional appreciation in the stock. Still, this can be excellent way to boost your income in a stock you currently own.
Very good position.
Thank you by reading your articles. We learn things.
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Very informative, thanks!
Thanks for the tips is really a good option to increase your capital.
So basically you do a short position and when you are in profits, you are going to buy the stock (not as position, just buy it) ?
Hi @nicetea if I am correct, I think you're referring to shorting a stock. I think the way that works is you borrow the stock from a broker or someone else and end up selling it. You end up profiting as the stock goes down in price. I believe that to close out or cover the short position you have to buy the stock and return it to who you originally borrowed it from.
own your own property is the best investment you could make
Thanks for posting!
property might just be the 'best' investment . Tangible assets
Very informative article. Covered calls are definitely a good suggestion. Following and upvoting you would be my pleasure.
Kindly do follow me and review my new series on superstitions and give your feedback @archerized - thanks :)