Thanks for the memories. I'm glad to see someone is trying to get the word out. When I ran across covered calls, in the 1990's, nobody knew what I was talking about. After researching I took my money to a broker. They were setting me up for their wealth allocation fund. I said no, you take $10,000 and I'll take $10,000 and after a year let's see who does better. They made me $4,000 and I made $40,000 on the $10,000. They were flabbergasted and said they didn't use that method anymore as it was old and outdated. It just goes to show that they were interested in their monthly pay rather than making me money. On another note would you do a how-to on weeklys as they didn't have them when I did covered calls?
Whew! That's the power of utilizing options to hedge your positions and collect premiums! I usually don't like to trade weeklies because they don't have a lot of extrinsic value left. I find the sweet spot is usually around 30-45 DTE and I can close or roll my positions. I remember that options back then only had expirations on the 3rd of every month. Now, there are ETFs like SPY that have daily expirations. How far have we come!
When I retired I moved my 401k to my investment company (well known company) where I already had an account set up. They managed my 401 and earned 4% but I earned 12% with my other account. Last year I earned 35%. It pays to do your homework! Be proactive!
Thank you so much for this ! Between watching your videos and taking your course everything is really starting to click for me ! I’ve been consistently investing more confidently to build up my portfolio to start this wheel strategy. I can’t wait! In the meantime I’ve been practicing with paper trading 🙌☺️
Can you make a video elaborating more of what happens when your shares get called away? (I.e. if the price goes too high over your strike price, and cuts into your premium collected, whats the move to make from that?
if you think the price will go down and you want to make money and buy that specific stock. What strategy do you have to do? If you already made a video about it, maybe you can give me a link? Thanks.
If you sell a covered call and it rockets deep into the money do you just roll the option out? Also do you ever buy options long or do you only short them?
Do you have a video that shows how to buy to close one of these positions? How do you figure out the profit/loss for effectively cancelling the position?
Hello Steve, does it mean after submitting the covered call sell option, along the way to expiration date, we dont have to do anything. Wait till the actual expiration date to see what is the market price. It will then automatically either exercised (means above strike price; my 100 shares will sell) or expired worthless (means below strike price; i keep 100 shares)?
Is it likely that when the underlying price is above the strike price that the other party exerises the contract and assigns the 100 shares away from you? I want to keep my shares
Another good video. So if the stock price flies past your call strike price is there risk of losing money or is it just a case your profit is capped at the strike price level?
if it flies past the strike price, you lose the profit you would have made had you simply owned the stock. To use his eample, you bought at 138, strike price of 140...if it went to 150, you would make the comission of I think he said 400$, plus 200$ on the stock (bought at 138, sold at strike price of 140$) but you would lose the 10$ difference between the 140 and 150. So the person that bought your call option would make a 1000$ for the 10$ past the strike price (less the 400$ in commision they paid you)!
I am almost ready to dip my toe into a covered call. I own several stocks that have over 100 shares. My question is this if as in your example I know that at the expiration date if the stock is at 140 or above it will be called away. But what happens if it goes to 140 and you still have a week to go on the contract can it be assigned before the end of the contract?
Thanks for these videos they are very well explained so I have account in Fidelity and when i am trying this i am getting option for sell to Open and sell to close whats the difference.
Okay this is a great tutorial - question tho, what happens if you put the "covered call" price below the current price. Say amazon is trading at 138 and you want to sell a covered call at a lower price, is that possible? Like you want to sell it at 130, what would happen then?
yes you can and you will collect more premium. you ONLY do that if you think the stock is coming down.. (bearish) in your example you will lose money if you sell at 130 but you bought at 138.. but if stock crash down you are a genius. =)
quick question and I’ll be thankful for an answer, is there a risk for selling covered calls on a downward trending stock other than the loss on the actual prices of stocks i own? I mean if I’m feeling bullish on the long term on a stock like at&t that trending downward at the moment am I gonna risk something other than just the price falling of the stocks I own? Thanks
Aside from the unrealized loss from the underlying stock dropping, the premium you’ll get from selling at the same strike month after month will slowly diminish as the strike will become further OTM from what the market price is.
5:29 Does it ever make sense to sell a covered call at the $125 price to get the $17.15 per share payout if you think the stock is going to go up? Or does this mean that at the end of the 30 day period you would be forced to sell your stock at $125 even if the stock was trading higher than that?
Good question! Yes. I believe you mean "buy to close." If theta decays the contract more than 50+%, then I like to buy the contract back and resell another covered call with a further expiration date. This is called "buying back and rolling out," or "BBRO," which is what I say with my community.
What about when you write a covered call but no one buys it ? Especially if your writing calls with a 4-8 week expiration. I've never heard anyone mention this eventuality. Just because you write it and are immediately credited with the premium, does that automatically mean someone want your strike price /expiration combination ?
You'll usually find a buyer, especially if you send a market order and sell a covered call with an underlying stock that has high liquidity (ex. S&P500 components). If you get paid the premium, this means there was a buyer on the other side.
You should talk about selling covered calls on SPY/QQQ. 2 etfs with great volume and options of daily to monthly options to choose from. It's a no brainer to hold SPY/QQQ very long term so why not sell covered calls against it? No brainer opportunity.
@@josephsaeteurn9158 If your collateral is lower then pick a stock with similar characteristics but within your price range. Ie. AAPL $178, GOOGL $130, etc. If you remain profitable doing these you'll eventually have enough funds do do SPY at $440 or whatever.
Hey Steve I’m a bit confused. So when you’re selling covered calls, wouldn’t the immediate response be to sell it at the highest price that the bid is asking for? For example, if you have a 100 shares of a stock that’s $100 each, and the highest asking price is $150, wouldn’t everyone want to put the call on that, collect the premium, and by the contract date if it’s risen to let’s say $125, wouldn’t you still get the option to sell the shares at a higher price and collect the premium?
Sometimes if you set a limit price that's too high when selling the contract, the order doesn't get executed. You can try trial and error when putting how much you want for the contract. If you can't get the price you want, you can lower it by around $5-10 and try again.
From this example, if AMZN goes to $150, I then lose the potential profit of $1,000 (100 shares x $10), correct? But it’s still a nice profit of $430 + $200. Another question I have is, what if the price of AMZN flies way past my strike price BEFORE expiration date? Could I buy that contract back (return the $430) & sell my shares say at $150 for a $12 x 100 shares profit?
"IF" you have the capital.. sell cover call and put same time.. you are guaranteed to have 1 winning trade.. with opportunity to win both trades. who wouldn't want guaranteed win.
You can use delta as a proxy to see if the stock will hit the strike price by expiration. For example, if the delta of an option is 0.30, this means there is around a 30% probability that the underlying stock will hit that strike price.
@@CalltoLeap so a call allows you to control 100 shares and a put is where you have the option to buy 100 shares? Man options is the most confusing part of any type of investing 😂
@@CalltoLeap something else I noticed all the brokers I currently use for different thing none of them have futures 😂 wth and they are big names too I guess I need a new broker
The $430 comes from the call option buyer that they pay from their account. You can still keep your shares unless the call option buyer decides to buy them from you.
What do you usually do after your shares get called away? Sell a put at the new price? Do you perform any certain type of analysis before you sell that put at the higher price than you had held at previously before getting called away?
Have you ever realized the the value of a stock is too much and you hold off on that CSP on the same stock but look elsewhere for value? If so, when and what stocks?@@CalltoLeap
Beginner investor here. I’ve watched so many videos on calls and puts. This is by far the best explanation.
❤❤
Thanks for the memories. I'm glad to see someone is trying to get the word out. When I ran across covered calls, in the 1990's, nobody knew what I was talking about. After researching I took my money to a broker. They were setting me up for their wealth allocation fund. I said no, you take $10,000 and I'll take $10,000 and after a year let's see who does better. They made me $4,000 and I made $40,000 on the $10,000. They were flabbergasted and said they didn't use that method anymore as it was old and outdated. It just goes to show that they were interested in their monthly pay rather than making me money. On another note would you do a how-to on weeklys as they didn't have them when I did covered calls?
Whew! That's the power of utilizing options to hedge your positions and collect premiums!
I usually don't like to trade weeklies because they don't have a lot of extrinsic value left. I find the sweet spot is usually around 30-45 DTE and I can close or roll my positions.
I remember that options back then only had expirations on the 3rd of every month. Now, there are ETFs like SPY that have daily expirations. How far have we come!
When I retired I moved my 401k to my investment company (well known company) where I already had an account set up. They managed my 401 and earned 4% but I earned 12% with my other account. Last year I earned 35%. It pays to do your homework! Be proactive!
Thank you so much for this ! Between watching your videos and taking your course everything is really starting to click for me ! I’ve been consistently investing more confidently to build up my portfolio to start this wheel strategy. I can’t wait! In the meantime I’ve been practicing with paper trading 🙌☺️
Woohoo! I'm glad to hear this, Amanda! Let me know if you have any questions!
would you suggest selling covered calls on stocks you've owned for a long time with 100%-200%+ gains?
Outstanding! Finally someone who makes this trade simple to understand.
Thank you!
Can you make a video elaborating more of what happens when your shares get called away? (I.e. if the price goes too high over your strike price, and cuts into your premium collected, whats the move to make from that?
I love your videos but who is buying the calls? What is their advantage?
if you think the price will go down and you want to make money and buy that specific stock. What strategy do you have to do? If you already made a video about it, maybe you can give me a link? Thanks.
If you sell a covered call and it rockets deep into the money do you just roll the option out? Also do you ever buy options long or do you only short them?
Good explanation, but would love to see what options do we have should price drop from purchase price instead of the expected rise
Where are you pulling up the price channel chart? Thanks.
Amazing. Great teacher
Thank you! 😃
Do you have a video that shows how to buy to close one of these positions? How do you figure out the profit/loss for effectively cancelling the position?
One question, should these shares be in a roth IRA or a regular taxable account fine?
Brilliant explanation. Are they any other stocks that are not as expensive that might be good to buy ?
I like SCHD, which is a dividend-paying ETF.
Great video ! Hopefully I can apply this knowledge soon
Best of luck!
Great explanation Steve. Id love if you could suggest a few stocks to sell covered calls on if my capital is like 5 to 10K
Hello Steve, does it mean after submitting the covered call sell option, along the way to expiration date, we dont have to do anything. Wait till the actual expiration date to see what is the market price. It will then automatically either exercised (means above strike price; my 100 shares will sell) or expired worthless (means below strike price; i keep 100 shares)?
I love it. Thank you very much.!
Is it likely that when the underlying price is above the strike price that the other party exerises the contract and assigns the 100 shares away from you? I want to keep my shares
Thank you steve. You did the right way. teaching with real examples. Thanks for sharing
Glad it was helpful! I like using real examples since I know my audience are typically visual learners. :)
Hello Steve, loved your presentation. Can you explain how does theta decay affect our premium in a covered call?
Another good video. So if the stock price flies past your call strike price is there risk of losing money or is it just a case your profit is capped at the strike price level?
if it flies past the strike price, you lose the profit you would have made had you simply owned the stock. To use his eample, you bought at 138, strike price of 140...if it went to 150, you would make the comission of I think he said 400$, plus 200$ on the stock (bought at 138, sold at strike price of 140$) but you would lose the 10$ difference between the 140 and 150. So the person that bought your call option would make a 1000$ for the 10$ past the strike price (less the 400$ in commision they paid you)!
Awesome. You are good teacher
Thank you! 😃
I am almost ready to dip my toe into a covered call. I own several stocks that have over 100 shares. My question is this if as in your example I know that at the expiration date if the stock is at 140 or above it will be called away. But what happens if it goes to 140 and you still have a week to go on the contract can it be assigned before the end of the contract?
Thank you Steve for your great explanation
How do you trade options in such a volatile market ? Can you still make consistent income when the market is up and down?
Thank you for sharing your knowledge, Steve!👏👏👏
Thanks for these videos they are very well explained so I have account in Fidelity and when i am trying this i am getting option for sell to Open and sell to close whats the difference.
Hi Steve, nice video. That means If you buy 100 shares of SPY you can earn 1200 euros selling at 4400 @ 4 days?
Thanks so much. Looks like the risk is very low if you pick the right stock
Thanks for watching Becky! There will always be risk in the stock market so see what your risk tolerance is.
If I own a $65 2026 call option, can I sell a $100 2026 option??
Or do I need to own actual shares? ❤
Thanks! Your video was great to understand.
Okay this is a great tutorial - question tho, what happens if you put the "covered call" price below the current price. Say amazon is trading at 138 and you want to sell a covered call at a lower price, is that possible? Like you want to sell it at 130, what would happen then?
yes you can and you will collect more premium. you ONLY do that if you think the stock is coming down.. (bearish) in your example you will lose money if you sell at 130 but you bought at 138.. but if stock crash down you are a genius. =)
Excellent explanation; it would be great if you explained Delta! I wouldn't use a Delta of -0.47, more like -0.20 or -0.25.
Right on for being bullish on amzn man! Breaking thru 200ATH currently!
Woohoo! I also bought some LEAPS a while back.
quick question and I’ll be thankful for an answer, is there a risk for selling covered calls on a downward trending stock other than the loss on the actual prices of stocks i own?
I mean if I’m feeling bullish on the long term on a stock like at&t that trending downward at the moment am I gonna risk something other than just the price falling of the stocks I own?
Thanks
Aside from the unrealized loss from the underlying stock dropping, the premium you’ll get from selling at the same strike month after month will slowly diminish as the strike will become further OTM from what the market price is.
Thank you for your masterful presentation.
Thanks Walt!
5:29 Does it ever make sense to sell a covered call at the $125 price to get the $17.15 per share payout if you think the stock is going to go up?
Or does this mean that at the end of the 30 day period you would be forced to sell your stock at $125 even if the stock was trading higher than that?
If I could give you 10 thumbs up 👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾 I would. Thank you for the education and for simplifying it! Awesome
Aww thank you!!!
Do you ever “buy your own contract out” before expiration? What are the benefits of doing that?
Good question! Yes. I believe you mean "buy to close." If theta decays the contract more than 50+%, then I like to buy the contract back and resell another covered call with a further expiration date. This is called "buying back and rolling out," or "BBRO," which is what I say with my community.
Steve how much capital do you need to start doing cover calls?
I usually like $10K-$20K. This is AFTER I have a position in long-term holds in the S&P 500. Again, this is what I'm comfortable doing.
@@CalltoLeap in your videos you say we can do cover calls in any is stock but not a cheap stock, can we do it withCoca-Cola?
Hi Steve if I dnt do this in Roth IRA and I’ll be doing this individual brokerage can the money reinvest so that I dnt need to pay taxes.
You'll still have to pay taxes on your premiums in a taxable brokerage account, regardless of if you reinvest them back into long-term holds.
What about when you write a covered call but no one buys it ? Especially if your writing calls with a 4-8 week expiration. I've never heard anyone mention this eventuality. Just because you write it and are immediately credited with the premium, does that automatically mean someone want your strike price /expiration combination ?
You'll usually find a buyer, especially if you send a market order and sell a covered call with an underlying stock that has high liquidity (ex. S&P500 components). If you get paid the premium, this means there was a buyer on the other side.
Thank you so much for your videos!
I'm glad they help!
Great video! Thanks!
Glad you liked it!
You should talk about selling covered calls on SPY/QQQ. 2 etfs with great volume and options of daily to monthly options to choose from. It's a no brainer to hold SPY/QQQ very long term so why not sell covered calls against it? No brainer opportunity.
I also do this too. SPY and QQQ have higher volume and liquidity, which makes it easier to sell contracts.
you really think people have 40K+ to sell CC?
@@josephsaeteurn9158 If your collateral is lower then pick a stock with similar characteristics but within your price range. Ie. AAPL $178, GOOGL $130, etc. If you remain profitable doing these you'll eventually have enough funds do do SPY at $440 or whatever.
Hey Steve I’m a bit confused. So when you’re selling covered calls, wouldn’t the immediate response be to sell it at the highest price that the bid is asking for? For example, if you have a 100 shares of a stock that’s $100 each, and the highest asking price is $150, wouldn’t everyone want to put the call on that, collect the premium, and by the contract date if it’s risen to let’s say $125, wouldn’t you still get the option to sell the shares at a higher price and collect the premium?
Sometimes if you set a limit price that's too high when selling the contract, the order doesn't get executed. You can try trial and error when putting how much you want for the contract. If you can't get the price you want, you can lower it by around $5-10 and try again.
@@CalltoLeap I see! Thanks for responding!!!
From this example, if AMZN goes to $150, I then lose the potential profit of $1,000 (100 shares x $10), correct? But it’s still a nice profit of $430 + $200.
Another question I have is, what if the price of AMZN flies way past my strike price BEFORE expiration date? Could I buy that contract back (return the $430) & sell my shares say at $150 for a $12 x 100 shares profit?
if it flies before the date someone is just gonna call them and take the 100 shares
Hi could you do this strategy on Vanguard?
I don't personally have Vanguard, but the layout of the option chain should be similar. Check it out yourself and let me know.
"IF" you have the capital.. sell cover call and put same time.. you are guaranteed to have 1 winning trade.. with opportunity to win both trades. who wouldn't want guaranteed win.
Sure! I like iron condors or broken wing condors/jade lizards too.
Thanks!🎉
🤔my robinhood options trading engine looks more complicated than what you described. 😢
Thought it was on amazon?
How does the delta affect this strategy?
You can use delta as a proxy to see if the stock will hit the strike price by expiration. For example, if the delta of an option is 0.30, this means there is around a 30% probability that the underlying stock will hit that strike price.
@@CalltoLeap great to know. Excellent nugget of information. I appreciate the reply.
So a call is where you already own 100 shares of said company ❓and a put is where you have the option to buy 100 shares ?
No. A call option allows you to control 100 shares. It doesn't mean that you already own 100 shares.
@@CalltoLeap so a call allows you to control 100 shares and a put is where you have the option to buy 100 shares? Man options is the most confusing part of any type of investing 😂
@@CalltoLeap something else I noticed all the brokers I currently use for different thing none of them have futures 😂 wth and they are big names too I guess I need a new broker
How are you taxed when you receive the premium on selling calls but the call isn’t executed and expires without being purchased?
You're taxed short-term capital gains, similar to your income.
where does the $430.00 come from if you still own the shares??
The $430 comes from the call option buyer that they pay from their account. You can still keep your shares unless the call option buyer decides to buy them from you.
What do you usually do after your shares get called away? Sell a put at the new price? Do you perform any certain type of analysis before you sell that put at the higher price than you had held at previously before getting called away?
Great question! Usually I'll resell another CSP at the strike price that my shares were called away to restart my wheel.
Have you ever realized the the value of a stock is too much and you hold off on that CSP on the same stock but look elsewhere for value? If so, when and what stocks?@@CalltoLeap
@@CalltoLeap really? interesting.. i would think its best to sell CSP lower than Strike price but what do i know. im not a millionaire..
Hope I can do this. Thank y ou.
Thanks for watching!
So far this year with selling covered calls on tech stocks I have ended up making less money than if I just held them.
最高素晴らしい致します👍👍👍
🥰
Beautiful
Thank you! Cheers!
I forgot this was a video about Amazon covered calls in the first 3 mins 😴
Very unrealistic. Especially on Amazon. Its gone from $145 to $157 in just 5 trading days in 2024!
You didn't even mention rolling. Its clear you dont do this yourself.
AMAZON is at $190 right now, so.............