Bullish Options Strategies
In this module, we'll show you how to create specific strategies that profit from up trending markets, including low IV strategies like calendars, diagonals, covered calls, and directional debit spreads.
Next Lesson
Exit Course

Covered Call

A covered call is an options strategy with undefined risk and limited profit potential that combines a long stock position with a short call option. Covered calls are used to generate income if an investor is moderately bullish and plans to hold shares of stock in an asset for an extended length of time.
Covered Call
Kirk Du Plessis
Apr 19, 2021

Covered calls are for the long-term stock investor that is looking for a steady or slightly rising stock price for at least the term of the option. This is generally a capital intensive strategy because you have to be long at least 100 shares of stock to sell a covered call. The trading setup consists of selling an OTM call option against your stock position for a credit. This credit is then used to reduce the cost of owning the stock by that same credit. If the stock never rallies beyond your strike price then you keep the credit as a profit against the position. However, if the stock rallies beyond that strike price of the short call, you would give up your stock at that price and bank any profit between your net purchase price and the strike price. As you can see, a covered call is a good strategy because it keeps some upside potential in the stock but also reduces the net cost of owning the stock.

No tags found.
Next lesson
Synthetic Long Stock
To create a long synthetic stock position, you simply buy an ATM call option and sell an ATM put option at the same strike price. This creates a bullish position with much less capital than owning stock.

Trade smarter with automation