Covered Calls: A Step-by-Step Guide with Examples.
How to write a covered call option (go short). If you want to get small but steady profit from your stock holdings, consider writing covered CALL options against them. As an option writer, your profit potential is limited and risk is theoreticaly unlimited but since you are covered with your stock position it amounts.To learn how to write a call option, first understand that the process involves selling the option contract.This is called “writing” because the seller of the option contract writes down the terms for the buyer. In another sense, the seller is the one making the promise to buy the underlying security, so he writes the promise down.Writing Covered Calls. Writing a covered call means you’re selling someone else the right to purchase a stock that you already own, at a specific price, within a specified time frame.Because one option contract usually represents 100 shares, to run this strategy, you must own at least 100 shares for every call contract you plan to sell.
Option Basics. A call option is the right, but not the obligation, to purchase an underlying stock at a specific price on or before a specific date. The price at which the option purchaser can buy.A call option is a contract between a buyer and a seller to purchase a stock at an agreed price up until a defined expiration date. The buyer has the right, but not the obligation, to exercise the.
To write an option, go to the option trading screen and select “Sell to Open”. Similarly, if you wish to close the written position, select “Buy to Close”.
