Saturday, June 30, 2007
Selling Covered Call Options Example MOT
Motorola (MOT) is currently trading at 17.70. Buy 100 shares at this price and sell the option to buy it at 18 in August 2007 for 0.50 per share. This will net $50 for the month of August if the stock stays at the current price in August.
Generating Income Through Selling Covered Calls
Open an account with the ability to trade options. My suggestion would be Interactive Brokers. I like their low commissions - $1 for stock trades and $0.75 per option contract trade. Start by buying at least 100 shares of a company. The idea is to sell a call option at a premium to generate extra income on the stock. Screen the available call options. Selling a call option allows the buyer to buy your 100 stocks at a set price. The price of the call option is the difference of the current stock price and the call option strike price along with a premium. Try to find a call option that will expire in one month. At the end of the month, if the call option strike price is above the stock price, then you keep the stock and the premium received from the sale of the call option. If the stock price is above the call option strike price, you sell the stock at the stated price for the option, and keep the money from selling the call option.
Saturday, June 23, 2007
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