The market place has changed, option premiums are not quite as expensive as they were even six months ago. This might seem like a good time to buy options, but the stock needs to move a lot in order to make money on the option premium. For anyone reading this report who already owns stock, especially stock they want to keep, then writing a covered call provides them an additional way to add cash to their account—to build up their asset base. When you buy an option, you have a 1 in 3 chance of making money. When you sell a option you have a 2 in 3 chance of making money. If the stock goes up, you make money. If the stock stays the same, you make money. Even if the stock goes down, you can still make a little bit of money. In short, it is a cash flow strategy to help support your family and pay your bills. It is a strategy that can be mastered. To “write” in the stock market means to sell. “Covered,” means you actually own the stock. A call is an option. We are going to sell the call option against our stock position to generate cash into our account.

For example, you have 400 shares of a stock at around $50 per share. Originally you purchased this stock at $45. You find the $55 call for November is going for $2.50. You have 400 shares, so you could sell 4 contracts at $250 each, which would be $1000. You have given someone the right to buy your stock from you at $55; you have been paid $1000 to give them that right. That $1000 is yours whether your stock goes up, stays the same, or goes down. If the stock moves above $55 on or before the expiration date, you could have this stock purchased away from you. You purchased the 400 shares of stock for $45, now you are selling it for $55. That would be a $10 profit per share multiplied by your 400 shares. This would be an additional $4000...

One important question is to ask yourself “do I want to sell this stock?” If you want to sell the stock, then sell the $50 calls for $4.50. That would generate $1800 into your account, and you would have a higher likelihood of being called out at the $50 strike price. If you really want to sell the stock, you could sell the $45 calls—that would generate $7 each, or $2800. Now as long as the stock stays above $45, you will have it taken away from you electronically on or around the weekend after the 3rd Friday of November. If you do not want to sell the stock, then sell the higher strike price, generate a smaller premium, but then have a lesser likelihood that the stock will be taken away from you. You still have the risk of the stock going down in value. You may want to consider stop-loss orders on your stock so that if it drops, you are out of the stock, then you would have to wind out of the call position.

It can be as easy as 1-2-3. 1) Keep your stock purchases in 100 share increments. 2) Ask your stockbroker about the different strike prices and different months, the further out, more premium, but then the stock is tied up longer. 3) Sell the option contracts against your stock—that money will be in your account in one day, which you can use for anything you want. THIS CAN BE DONE MONTHLY!

Larry Potter is a recognized authority on the subject of trading. For a FREE report on HOW TO TRADE FAST from
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