What is a Covered Call?
I love Writing Covered Calls. I surprised that more people don't now about them or how to do them. WCC is a way to get paid cash for owing a stock and agreeing to sell it at a certain price. It's much like selling an option on real estate. Here is an example. OAS, or Oasis Petroleum is at $4.46. For fun let's buy 1,000 shares. That would cost $4,460, but you need only need put up half of that, or $2,230. What would this amount earn you in the bank, or even in real estate or gold?
The call option out one month for the $4.50 price is 60¢ to sell. By selling this we agree to sell the stock for $4.50. 1,000 times 60¢ would be $600. You will get the cash tomorrow and you can spend it, leave it alone, buy more stock, etc. It's your money. You received this for agreeing to sell your stock. $600, that's a lot.
If you actually sell the stock you would make another 4¢, or $40. This process doesn't figure in commissions, which are minimal, and we don't want to trip over pennies on the way to dollars.
That's it. Simple in concept and simple in practice. What if $2,000 or $4,000 could make you $600 a month? If you had three or four of these, could you retire. What would an extra $600 do for your budget?
I've written a special report on this. It explains it all. It's called WADE COOK'S CASH FLOW FIRST (Formerly Job Free Income). Get yours at wadecook.org. It's Free and there is no obligation. I'm just trying to help as many people as I can—grow out of their problems, provide for their families, and live a more productive life.