Hi, Andy Sirski here. This essay on options explains in great detail how we use the strategy we call selling covered calls. The idea was a little difficult to figure out, but once I did, it has helped me make thousands of dollars. Basically, I buy a stock or own shares and I sell what is called a covered call. This is like renting out land.
When we sell a covered call, we keep collecting the dividends, but we cannot put a stop loss on the stock. And once in a while the stock can go up more than the money we collect by selling the call.
The average return from selling covered calls seems to be around 2.5% PER MONTH but with a little research we often collect 4 to 6% per month. The returns are proportional. So a smaller investor with $10,000 could pick up $200 to $400 a month while an investor with $200,000 could pick up $5000 to $8000 a month.
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Read on. Andy