Covered Call Options Strategy is combination of Stock buying and Short Call . So in this you need to have position in the underlying stock before selling the out of money call option. This is passive income strategy through which you can generate regular in flow from stock you own. If you feel that your portfolio stock is not going to give positive returns this month then you can use the strategy to get some return from it and may be reinvest the same in stock again.
Previously we have discussed Synthetic long call which also combined Swing trading with Options trading. This is the second such strategy. So you may want to revisit previous one as well and try to figure out the differences between the two and which one you should use in which scenario understanding.
You can watch either the English Video or Hindi Video to understand the strategy in details.If you are new to Options trading then I would suggest you to watch or read the Getting Started tutorial on Options . That will help you understand the strategies as well. Below videos will help you understand below points
- When to use the strategy
- Profit and risk associated with this strategy
- You need to have good capital for this strategy as it requires buying the underlying stock along with Options trade
- This technique can only be applied for F&O stocks
- This technique can not be applied for Index
- Understand with an example so that you can use it in real world scenario
English Video
Hindi Video
Conclusion
Covered Call is yet other tool which combines two different flavors of traders. Every investor or trader should be aware of it because it helps them. It also breaks the wall that one should get restricted to one form of style. As knowing things helps generate better returns if performed correctly. Since it uses Short Call so you should watch that video and getting started video to make most of it. Those two are fundamental which you should be aware of.
So if you are a trader (I mean swing trader or Investor) and you think there is no need to learn Derivatives market then you need to rethink yourself. Derivatives can help you earn passive money if market foes not go your way or it negative. Then also you can earn money from your investment. This recurring income will not be present if you do not learn this technique. So you will be losing out on another income stream which could magnify your possible returns from market. This is why I recommend everyone to understand different concepts of market as it helps you make money or increase returns over the years.
There should not be a thought that I am investor and trading is not my flavor. You should then read to combine both trading and investing and how knowing or assimilating both inside you helps you perform better. There is not need to be in denial or select one mode over the other. It is better to follow both of them.