October 6, 2008
Writing Coverd Call Options?
westphalia1 asked:
Is margin ABSOLUTELY required to do these? I have traded plain calls and puts-but nothing else.
Is margin ABSOLUTELY required to do these? I have traded plain calls and puts-but nothing else.
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Comments on Writing Coverd Call Options? »
No its not. But it may be required by different online brokerages.
If you have never traded covered calls, the one thing you should understand is that writing covered calls is very similar to shorting stock, with regards to how you will make money.
(sell high, buy lower)
To help you out, I will give you two basic guidelines to writing covered calls:
1. Only sell them 1 to 3 months out. And even 3 Months is stretching it. If you know options, you should understand that in the last 3 months of an options contracts life, it loses value at an accelerated rate (which is great for you!)
2. Try to make sure you can get at least $1 premium. Though this sounds stupid, Ive seen people writing them for as little as 30 cents.
3. Sell them at least 2 points into the money.
If you have questions on this topic, just shoot an email over to me.
Christian Nago
CEO & Chief Investment Officer
I do it all the time on scottrade and no its not required.
No its not. But it may be required by different online brokerages.