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Aceducey,Thank you for a very details replied.Like you mentioned, covered calls is great if the stock is moving sideway or falling, then you would use naked calls but it's a very dangerous for in-experience trader (like myself).So the best place to start writing calls is to only write calls against your existing shares that you are holding and it's a good company.The prefer stock for writing covered calls: NCP, NAB, CBA, TLS, BHP, LLC, RIO...just to name a few.You can buy insurance for your covered calls writing options by taking a long term put options against the shares that you are writing. But for the first 1 or 2 months you won't make much money because by taking long term put will be much more premium than your first 1 or 2 calls. But in long term you will generate income from it since you already have insurance against that share therefore you just keep writing covered calls against it.Eg.1. Purchase NCP shares $12.45 for 5000 shares = $62,250.2. Write a covered calls options 5 contract at $12.50 expiry date 29/07/04 for $0.345 per share = $1,725 for that month on premium.If the share price go about $12.50 then you might get exercise in that case your total return will be $2140 for July Month and keep doing that every month.
Aceducey,
Thank you for a very details replied.
Like you mentioned, covered calls is great if the stock is moving sideway or falling, then you would use naked calls but it's a very dangerous for in-experience trader (like myself).
So the best place to start writing calls is to only write calls against your existing shares that you are holding and it's a good company.
The prefer stock for writing covered calls: NCP, NAB, CBA, TLS, BHP, LLC, RIO...just to name a few.
You can buy insurance for your covered calls writing options by taking a long term put options against the shares that you are writing. But for the first 1 or 2 months you won't make much money because by taking long term put will be much more premium than your first 1 or 2 calls. But in long term you will generate income from it since you already have insurance against that share therefore you just keep writing covered calls against it.
Eg.
1. Purchase NCP shares $12.45 for 5000 shares = $62,250.
2. Write a covered calls options 5 contract at $12.50 expiry date 29/07/04 for $0.345 per share = $1,725 for that month on premium.
If the share price go about $12.50 then you might get exercise in that case your total return will be $2140 for July Month and keep doing that every month.
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