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Learn the essential pieces of the covered call options strategy in my newest tutorial!
The covered call strategy is super popular because it’s an easy way for long-term stock investors to boost potential returns while waiting to sell shares at a higher price, or reduce loss potential on the shares.
A covered call consists of buying 100 shares and shorting a call option. If the stock is below the call’s strike price at expiration, the trader makes a 100% profit on the short call as it expires worthless. The trader can sell a new call in the next expiration cycle to collect more premium and keep the strategy going.
If the stock is above the call’s strike price at expiration and the trader does nothing, the trader will get assigned on the short call and sell their 100 shares at the call’s strike price. The trade realizes the max profit potential, but the shares are lost.
In this video, you’ll learn the essentials of this popular options trading strategy with historical trade examples visualized with real option data.
I also do a live trading session where I enter a covered call position on tastyworks, wait a few days, and exit the position before expiration. I explain why the position made/lost money.
0:00 Introduction
0:28 What is a Covered Call?
1:44 Basic Covered Call Example & Risk Graph
3:30 Historical Trade Example #1
4:31 Max Profit Calculations (Two Approaches)
6:15 Historical Trade Example #2
7:48 Historical Trade Example #3
9:05 Learn Data-Backed Options Strategies
9:31 What Happens to Covered Calls at Expiration?
10:36 Securing Partial Profits on the Short Call
11:17 Buying Back the Short Call for a Loss
12:19 What Happens After Expiration?
14:09 How to Choose a Call to Sell?
16:47 LIVE Covered Call Trading on tastyworks: Entry & Exit
28:35 Best Time to Enter a CC?
29:54 Can I Trade a CC With Less Money?
30:25 Do I Have to Hold to Expiration?
31:08 How to Avoid Short Call Assignment?
=== Recommended Videos ===
➥ Avoid This Covered Call Mistake:
➥ Poor Man’s Covered Call Tutorial:
➥ Options Trading for Beginners:
➥ Call Options for Beginners 2023:
➥ Vertical Spreads for Beginners:
Disclaimer: Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction, or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not necessarily indicative of future results. I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make.
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