A crazy stock market is perfect for covered call writers. When volatility is high, so are option premiums, which means this popular income strategy should be a profitable one throughout 2019.
New to covered calls? Here’s how they work:
- You buy at least 100 shares of a stock or fund. You now own these outright. (Why 100? Because one covered call contract covers 100 shares of underlying stock.)
- You then sell (“write”) covered calls at a price around or above the stock’s current price for additional income. In doing so, you are agreeing to sell the stock at that price – the “strike” – in exchange for money today.