Selling covered calls is a great way to gain a monthly income from a stock that you already own.
Selling out of the money calls can benefit you in two ways.
1.
You Can Make some extra Cash You can make some extra cash by selling out of the money calls on a stock that you already own.
The only disadvantage to the strategy is that you could risk potential profits if the stock goes up too far.
But if the stock is not up trending it is a great way to collect some income off of it.
2.
You Can Still Profit From Some Appreciation The nice thing about selling out of the money calls on a stock is that you can still profit from some of the appreciation on the stock.
For example if the stock is trading at $40 and you sell the $50 call you can still keep the profit if the stock goes to $49.
99.
It is just if the stock goes to $50 or higher your profit would be limited, until the option expires.
This is a great alternative to selling in the money or at the money calls on a stock, which completely take away your ability to profit if a stock goes up within a certain amount of time.
The only disadvantage here is that you will not make as big of a premium by selling the $50 call as you would if you sold the $40 call.
All and all covered calls is a great way to see consistency in the market and to earn a nice monthly income from one of your positions.