Increasing Return With
by Joe Demkovich and Eugene Theriot
Worried about how exposed you are to price fluctuation in
your options position? Donít be. Hereís how you can
retain flexibility by using covered-call options.
One of the most conservative
investing actions you can
take is to sell covered-call options.Covered refers to
your owning the stock underlying the calls you sell.
Thus, if someone actually
does "call" you, or take you
up on your offer to sell the
option,you can just sell them
the stock. Of course, you do
get paid for this, sometimes
There are three principal reasons to sell calls on stocks
you already own:
1 You think the stock may not go up much in the near term
and you want to increase your income.
2 You want to sell the stock at a price above the current
3 You want some downside protection against a drop in
the stock price.
In return, you must be willing to give up some of the potential
upside movement in the stock.