How do I Start?
- Use the patented PowerOptions search tool, SmartSearchXL, to quickly and easily find your ideal, high yielding Covered Call Investment Strategy from over 140,000+ Covered Calls.
- Become familiar with some Basic Pricing Facts and covered call strategies you can use in a:
- Stable Market
- Rising Market
- Falling Market
- Use PowerOptions Easy Access Tool Links if you want to access more detailed research information on any stock or option you find listed.
Some Basic Pricing Facts
- Stocks generally move up and down in cycles, not in a straight line.
- Purchase stocks at lows in the cycle
- Sell calls at highs in the cycle
- Control commission costs by selling 5 or more contracts.
- The highest annualized yields are realized by:
- Selling calls with only about one month to expiration, rather than options with 2 or more months until expiration.
- Selling calls on stocks priced between $10 and $40 per share. Lower priced stocks often have better yielding premiums. See the table below.
|
| Price Variation Table |
|
Call Strike Price
|
Call Premium
(One Month Out)
|
Yield on Premium
per month
|
| $100 |
$2.50 |
2.5% |
| $50 |
$1.50 |
3.0% |
| $20 |
$1.00 |
5.0% |
| $10 |
$0.60 |
6.0% |
|
|
As shown when the strike price came down by a factor of 10 (from $100 to $10), the price of the option only decreased by 4 (from $2.50 to $.60). The lower-priced stock will give a larger yield value. The example yield calculations above move from 2.5% to 6.0%, favoring the lower priced stock when using a covered call strategy.
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