For those of you who don't know it, Apple split its stock 7-1 this week. For call sellers, this is a massive opportunity. For people or organizations that had 14 shares of stock, they now have the opportunity to start selling call options for income. To have another revenue stream basically given to you is exactly what Apple has just given you as a shareholder.
For that matter, if someone owns 2 shares of stock, they may be able to participate in selling the mini options for Apple now. To this end, I do not know if Apple will still be able to participate in mini options given the price is below $100 per share. So check first.
Three cheers to wealth building through using covered calls!
As always, do your own due diligence! This is just information and opinions and does not constitute a buy or sell recommendation for any security.
Tuesday, June 10, 2014
Monday, February 17, 2014
Creating The Extra Dividend
Dividend reinvestment is a highly touted way of building wealth. Using the process of selling call options can be looked at as an extra dividend and speed up that building of wealth.
The first step is to pick a strike price and time frame that you would be willing to sell the shares. For example, if you own shares of a stock at $10.00, you might be willing to sell the shares this year if the price reached above $12.00.
The second step is to look for options within that time frame that would bring you added revenue if you were to sell them. For example, if you were to see that a call option that is three months away from today would give you an added dividend, you might want to sell the option in order to receive that revenue.
The third step is to understand the movement of the stock. How likely is it that the stock can reach that price within the given time frame? Are there any large news events scheduled or possible during the given time frame? Understanding the stock's movements can give the investor or trader an edge in picking call options to sell.
The fourth step is to actually sell the option and receive the money. That money will generally quicken the process of purchasing new shares. In this way, it can be treated as an extra dividend being received because of you owning those shares.
The bad part of this process is that you are locking in a max profit on those shares at $12.00. But you have already accepted that price in step one. And here is where the magic comes in. It has been reported many times that eighty percent of all options will expire worthless at expiration. That means that you have an 80% chance of repeating the process. Again and again.
Selling call options is not always the right thing to do. But when it is possible, and the rewards (extra revenue) outweigh the risks (loss of shares), wealth continues to be built.
The first step is to pick a strike price and time frame that you would be willing to sell the shares. For example, if you own shares of a stock at $10.00, you might be willing to sell the shares this year if the price reached above $12.00.
The second step is to look for options within that time frame that would bring you added revenue if you were to sell them. For example, if you were to see that a call option that is three months away from today would give you an added dividend, you might want to sell the option in order to receive that revenue.
The third step is to understand the movement of the stock. How likely is it that the stock can reach that price within the given time frame? Are there any large news events scheduled or possible during the given time frame? Understanding the stock's movements can give the investor or trader an edge in picking call options to sell.
The fourth step is to actually sell the option and receive the money. That money will generally quicken the process of purchasing new shares. In this way, it can be treated as an extra dividend being received because of you owning those shares.
The bad part of this process is that you are locking in a max profit on those shares at $12.00. But you have already accepted that price in step one. And here is where the magic comes in. It has been reported many times that eighty percent of all options will expire worthless at expiration. That means that you have an 80% chance of repeating the process. Again and again.
Selling call options is not always the right thing to do. But when it is possible, and the rewards (extra revenue) outweigh the risks (loss of shares), wealth continues to be built.
Friday, February 7, 2014
Welcome
Welcome!
One of the more interesting and valuable ways to generate financial wealth is to sell call options on stock that you own. This blog will be used to educate, and promote the process. We would like to welcome all readers from Sell The Call to the blog.
A few general topics will be covered on this blog including lists of possible covered call trade candidates, how the process can speed up your path to financial wealth, other covered call websites and resources, etc..
One of the more interesting and valuable ways to generate financial wealth is to sell call options on stock that you own. This blog will be used to educate, and promote the process. We would like to welcome all readers from Sell The Call to the blog.
A few general topics will be covered on this blog including lists of possible covered call trade candidates, how the process can speed up your path to financial wealth, other covered call websites and resources, etc..
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