DaytradeTeam Brainzzzz

Covered Calls are one of the most simple options strategies. You simply sell call options against an existing stock position in your account. Think of it as a way to combine swing trading and options trading. Here is the best way to go about making a covered call trade:

1. Find a stock that you believe will remain steady in price or move up slowly
2. Buy the stock in a round lot (400, 900, 3500---NOT 961 shares)
3. Find a call option that is out of the money and 1-2 months from expiration
4. Sell the call option in an amount equal to your number of shares--for every 100 shares of stock you own, sell 1 contract
5. Wait for expiration day---if your option expires out of the money, repeat steps 3 and 4

This approach gives you an income producing effect on your account, because each month you can sell call options to build up cash in your account. In the event that the stock moves up past the strike price of the call option that you have sold, you will make a nice profit on the stock that you own.