Friday, August 10, 2007

Covered Call Option Success Tips

How to increase your yield on stock options, and covered call options.

  • Pharmaceutical companies are very volatile and are not good covered call candidates.

  • Use moving averages (5,20 day) to spot uptrending stocks for a covered call.

  • Instead of selling stocks outright, consider writing a covered call. That way you name your sales price as well as pick up an option premium on the covered call sale.

  • You should write a near-month covered call. This results in higher daily yields than if you write a covered call with expirations two or more months out.

  • Use a limit order to sell a covered call. This allows you to set the price, a market order does not. You can specify a GTC limit order and just wait for the order to be filled.

  • Option premium quotes can become stale because the covered call option has not been traded for some time. Each covered call in our report has been traded that day.

  • Writing a covered call on stocks priced at less than $40 per share creates a higher percentage covered call option premium yield than writing a covered call on higher-priced stocks.

  • Your profits grow faster if you write your covered call in an account, such as an IRA।

by Dennis Borgeson

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