I Know Finance Well

Covered calls can be a very profitable strategy. When you sell a covered call you are giving someone else the right to buy a stock from you at a given strike price by a certain date. The major disadvantage of selling calls is that you do risk being forced to sell your stock in the future. However you do get paid a premium to take on this additional risk.

So, why would someone sell covered calls? Well I sell them all the time for these reasons.

1. Cash Flow

Writing covered call It is the best way to produce some monthly cash flow off of a stock that you own. In general many times you can make in a month what dividends will make in a year. That is big.

It does come with a little bit of additional risk, but I believe it can defianely be worth it because selling calls adds up over time.

2. Combine With Great Stocks

This strategy can be combined with other strategies such as value investing. By buying stocks that have great fundamentals you are getting into a position that is likely to go up as time goes by. This means that while you are making money selling covered calls you would also be making money on the appreciation of the stock.

Combining this strategy with dividend paying stocks can be another way to maximize your profit. They give you a third way of making money from the stock market.

3. Low Maintenance

Selling covered calls It really doesn’t take a lot of time at all to sell covered calls. I sell covered calls all the time and it normally takes me about 5 minutes a month or so to keep it going. That is really the best part about this strategy is that if you do it right it can offer you a passive way to make an income from the stock market.