Great video Rick. Love the way you explain everything in a calm and understandable way. I am currently selling covered calls on a few stocks. My favorite to do this with is Altria ( MO ). I am building a bigger cash position because the market seems overvalued. So selling options sure helps to grow a cash position. Selling calls with a delta at 0.30/0.25 on MO creates around 20/25% + dividend 8% = 28/33% in theory year to year. After 3/4 years this investment is paid off. Selling calls earn so much more cashflow then dividends alone. Then you also have cash secured puts which are amazing as well for cashflow.
Thanks for letting me know, and congratulations on your success! No doubt, covered calls and cash secured puts are incredible strategies to build wealth!
Rick , one of the problems for those starting out who either don't have the capital to purchase 100 shares to buy 100 shares of Abbot stock mentioned in the video for $11800 or don't want to risk this amount of capital - is there a high dividend share or ETF you can recommend where you can purchase 100 shares of the stock or ETF for a more modest amount of money to get started with ?
You’re right! Not everyone has 100 shares of something to sell covered calls On. Perhaps these investors could start with a covered call ETF like the XYLD or QYLE?
If I sold a cover call to receive $0.02 in premium and I had to have $150 options buying power, my question is what happens to that buying power? Did I just spend $150 just to make $2, so does that mean my account is-148 now or does that money stay in my cash balance? I'm just trying to understand what happens to the options buying power money that you have to have in order to sell a cover call
Thanks for the kind words. To answer your question- if you got assigned (sold a put option, stock drops below the strike at expiration- you buy the stocks) - yes, you can sell covered calls on the stock. Alternatively, or additionally, to attempt to fix the trade, you could sell another put option on the same stock, with a lower strike. This is called rolling.
Hi, Just discovering Covered call, quite interesting strategy. Your video is very well done and clear. Just one point regarding the earning period. You said you prefer to buy 1 or 2 weeks after the earning? Shouldn't it be before the earning? If you buy after you risk a high volatility? Thx
Call sellers usually want to avoid risk of being exercised. That’s why it’s better to sell after earnings. Of course if you’re happy taking the risk, then go for it!
Hi Rick, I'm the beginner trying to learn option trade. I have Vanguard account. I have 1 stock with 100 shares now. To sell Covered Call, does it mean I select Buy +Put or Sell +Put ? So confusing for me. Thanks
"SELL TO OPEN" 1 contract of that stock you own (if it's optionable). That option position stays Open until someone "calls" it away meaning you automatically sell the 100 shares. If you don't want to sell the shares you can always "BUY TO CLOSE" the option contract before it's 'called' away from you. This all assumes the stock has increased above your strike price, otherwise it doesn't get called away (sold) and you just keep your 100 shares. You keep the call option premium either way. Hope that helps.
Rick, again trying to get clarification. If one of your dividend holdings that you have been selling covered calls just keeps dropping do you keep selling calls all the way down, or at some point (when?) do you close the position? I recognize that one answer may not fit all situations, but I can't find this talked about in anyone's dividend stock positions. Please let us know what you think.
Great question - and I’m surprised I haven’t covered it much. The best traders have an exit strategy. Ie what happens if the stock drops. Or when is it time to take profits. It’s an answer that is personal to you, and your trading style. For me, personally, if I’m buying 100 of ABC and selling a covered call on it (as a pair on IB)- I’ll almost always set stop loss to around 2-3x the option premium. So, if I get $1 in premium, I might set the stop to $2 or $3 less. As for profits, when buying a pair (stocks + selling the call), I HOPE the option expires in the money. That way I’ll get assigned and can start again with another stock. But… it really gets tricky if I have a long term holding. In that case, if I sell a covered call, I’ll want to watch to see that in *dont* get assigned! I hope I answered your question!
Good Lord, if a person is going to sell covered calls on a dividend stock, and they don't know what a call or a dividend is, they need to STOP and go learn these things long before they start selling options. Why do all these videos start as if everyone is a NOOB? NOOB's should not be doing this anyway! This is highest level options approval!
After watching 100 videos to lean selling covered calls i finally got it :) thanks for the simple yet efficient explanation!
Thanks for the kind words!
If you are new to Call options - this is THE best video on UA-cam on Call options that i have seen .
Thanks for the kind words!
Great video Rick. Love the way you explain everything in a calm and understandable way.
I am currently selling covered calls on a few stocks.
My favorite to do this with is Altria ( MO ).
I am building a bigger cash position because the market seems overvalued. So selling options sure helps to grow a cash position.
Selling calls with a delta at 0.30/0.25 on MO creates around 20/25% + dividend 8% = 28/33% in theory year to year. After 3/4 years this investment is paid off. Selling calls earn so much more cashflow then dividends alone.
Then you also have cash secured puts which are amazing as well for cashflow.
Thanks for letting me know, and congratulations on your success! No doubt, covered calls and cash secured puts are incredible strategies to build wealth!
I’m a complete newbie. But subscribed and learned a lot so far.
Rick one of the best videos on here on Covered Calls . Really excellent !
Glad you liked it!
A really good video !! You cover so many of the important topics here really well . Thank you
Glad it was helpful!
Thank you very much this video was so nice I'm trying to do sell my first option and NYCB
Thanks for your kind words! Let me know how it goes!
Rick, do you set a stop or just keep rolling the call down if the stock turns down?
Exactly the question Everyone has.
Rick , one of the problems for those starting out who either don't have the capital to purchase 100 shares to buy 100 shares of Abbot stock mentioned in the video for $11800 or don't want to risk this amount of capital - is there a high dividend share or ETF you can recommend where you can purchase 100 shares of the stock or ETF for a more modest amount of money to get started with ?
You’re right! Not everyone has 100 shares of something to sell covered calls
On. Perhaps these investors could start with a covered call ETF like the XYLD or QYLE?
@@RickOrford Rick . Thank you for the suggestions . I will check them out !
What is the $$ value difference of Selling a Call, vs. Buying a Put ?
Excellent video. Very informative
If I sold a cover call to receive $0.02 in premium and I had to have $150 options buying power, my question is what happens to that buying power? Did I just spend $150 just to make $2, so does that mean my account is-148 now or does that money stay in my cash balance? I'm just trying to understand what happens to the options buying power money that you have to have in order to sell a cover call
Thanks Ric, much appreciated as always. So essentially if you're sell a put option and it back fires, covered calls will always back you up?
Thanks for the kind words. To answer your question- if you got assigned (sold a put option, stock drops below the strike at expiration- you buy the stocks) - yes, you can sell covered calls on the stock. Alternatively, or additionally, to attempt to fix the trade, you could sell another put option on the same stock, with a lower strike. This is called rolling.
Video starts at 11:00
You are awesome amazing at explaining this ❤🤓 Thank You ❤️ 💰💰💰🎼🎹
You’re welcome!
Hi,
Just discovering Covered call, quite interesting strategy. Your video is very well done and clear.
Just one point regarding the earning period. You said you prefer to buy 1 or 2 weeks after the earning? Shouldn't it be before the earning? If you buy after you risk a high volatility?
Thx
Call sellers usually want to avoid risk of being exercised. That’s why it’s better to sell after earnings. Of course if you’re happy taking the risk, then go for it!
Hi Rick,
I'm the beginner trying to learn option trade. I have Vanguard account. I have 1 stock with 100 shares now. To sell Covered Call, does it mean I select Buy +Put or Sell +Put ? So confusing for me.
Thanks
"SELL TO OPEN" 1 contract of that stock you own (if it's optionable). That option position stays Open until someone "calls" it away meaning you automatically sell the 100 shares. If you don't want to sell the shares you can always "BUY TO CLOSE" the option contract before it's 'called' away from you. This all assumes the stock has increased above your strike price, otherwise it doesn't get called away (sold) and you just keep your 100 shares. You keep the call option premium either way. Hope that helps.
I should have added the above is selling 1 'covered call', nothing to do with 'puts'..
I sell covered calls without a margin account in my IRA
Rick, again trying to get clarification. If one of your dividend holdings that you have been selling covered calls just keeps dropping do you keep selling calls all the way down, or at some point (when?) do you close the position? I recognize that one answer may not fit all situations, but I can't find this talked about in anyone's dividend stock positions. Please let us know what you think.
Great question - and I’m surprised I haven’t covered it much. The best traders have an exit strategy. Ie what happens if the stock drops. Or when is it time to take profits. It’s an answer that is personal to you, and your trading style. For me, personally, if I’m buying 100 of ABC and selling a covered call on it (as a pair on IB)- I’ll almost always set stop loss to around 2-3x the option premium. So, if I get $1 in premium, I might set the stop to $2 or $3 less. As for profits, when buying a pair (stocks + selling the call), I HOPE the option expires in the money. That way I’ll get assigned and can start again with another stock. But… it really gets tricky if I have a long term holding. In that case, if I sell a covered call, I’ll want to watch to see that in *dont* get assigned!
I hope I answered your question!
@@RickOrford Thanks so much for the thorough answer.
Perfect
what tax do you pay on Covered call income?
It's most likely a capital gain. Your accountant will answer that :)
Good Lord, if a person is going to sell covered calls on a dividend stock, and they don't know what a call or a dividend is, they need to STOP and go learn these things long before they start selling options. Why do all these videos start as if everyone is a NOOB? NOOB's should not be doing this anyway! This is highest level options approval!
Totally agree, but, you gotta start somewhere :-)
Panu naging Mali saleng k sa mg SINASABI NIYO SA Buhay k sinira NILA