Selling covered calls
Selling covered calls is one (conservative) way to make money off a stock stuck in a trading range. The idea is to sell a call on a stock that you already own. If the stock shoots up, your stock will be called away (sold) and you'll get for your stock the strike price plus the premium you collected when you sold the call. For example, Microsoft closed Friday at $27.17. The July 2006 27.50 call closed at $1. If you sold one and the stock went up you'd get $27.50 + $1 = $28.50 for your stock. If it closes below $27.50 in July, you can just pocket the $1 premium and keep your stock. If it drops, hey bad news, but at least you have $1 per share to cushion the loss somewhat.
What I do is determine a trading range. MSFT in the last year has traded in the $24 to $28 range. When it gets near the top of its range, sell covered calls at a strike price as near as possible to the current price. If the stock drops down to the lower part of the range, buy your call back to take your profit and close the transaction. You can do this over and over if you are lucky.
4 Comments:
Basic Funda is when market is down prefer selling .Then buy script at lower cost then sell it at higher price.
Regards
Sharetipsinfo
Hi
Your blog is quite nice and informative.
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Trading in market requires both time and Knowledge. Without these two factors its impossible to trade.If you get recommendations from some specialist then also you must keep in mind its your money you should invest it wisely. Its always advisable to get recommendations from analyst but again before investing you should do your research also.
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Sai Stocks n Shares
www.saistocksnshares.blogspot.com
Hi Everyone
In Stock market no matter whether its Indian stock market or DOW any one.The best way to make money is by following market trend. If Market is going down then you should prefer selling and when its bit up then buying is better option.
We say we will buy at lower levels for maximum gains.However this strategy is not always best. Think before taking any action.
Use some stock market consultant or do research work yourself.
Always remember its your money invest wisely.
Regards
Sharetipsinfo team
Trading in stock market is quite risky however it is very important to understand and learn how to control risk in the share market. Share market is known for their volatile nature however good research and stock selection can be very helpful to deal with volatile NSE and BSE
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