covered call options

Submitted by admin on Mon, 11/08/2021 - 23:05

When you own a certain amount of stock or other security, you sell call options to generate income stream. This financial market transaction is called covered call. This strategy is also called buy-write strategy.

If the buyer of this call option decides to exercise on expiration day or before expiration day, the underlining stocks will have to be delivered to the covered call option buyer.

out of the money covered call

Many investors use covered call options to generate incoming cash flow. When stock price is high enough, investor sell covered calls. If stock price drops later, investor can buy the covered call back at a lower price.

 

There are many covered call ETFs in the financial market, such as QYLD, SEML, SLVO.

QYLD keeps track of NASDAQ 100 index. The fund invests 80% of its total assets into QQQ ETF. Meanwhile, the fund keeps selling one-month at the money covered call options. This covered call strategy seems to be quite effective, because the fund gives over 10% dividend annually to their share holders.