Covered Calls for Beginners (Options Trading Strategy Tutorial)

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The covered call options strategy is very popular among long-term stock market investors.

A covered call consists of selling or “writing” one call option against 100 shares of stock, which effectively reduces the cost of the shares and creates downside protection.

How to Trade a Covered Call with Less Money:

If the stock price is below the call’s strike price at expiration, the investor will keep 100% of the premium they collected when selling the call option. The process can then be repeated in the next expiration cycle.

In a perfect world, the investor can keep selling calls to create a stream of monthly income as the options continue to expire worthless. In reality, it’s likely that the stock price eventually ends up above the short call’s strike price at the time of expiration, and the investor will be forced to sell their shares of stock at the call’s strike price.

The downside of the strategy is that by selling a call against the shares, the investor gives up their profit potential on the shares above the strike price of the short call.

In this video, we’ll break down everything you need to know about the covered call strategy and show numerous historical trade examples to demonstrate how covered calls can be expected to perform in various scenarios.

Video Topics:

– What is the covered call strategy and how is it constructed?
– How to set up the strategy on the tastyworks trading platform
– Walkthroughs of historical trade examples with profit/loss visualizations
– How to keep your shares at expiration when trading covered calls
– Frequently asked questions

Be sure to leave a comment down below with any questions you may have!


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44 thoughts on “Covered Calls for Beginners (Options Trading Strategy Tutorial)”

  1. I agree I stopped watching after five minutes. I was looking for something quote for beginners” and you just launched into the most complicated speech ever. Start with the basics. No clue what you’re talking about.

    However you seem to really know your stuff I assume at least… I will be back after I listen to somebody else’s beginner video lol I would say this is more intermediate

  2. Great video. You cover all the possibilities and options in Great detail. This is very complex for most people but you explain it well and cover all the risks. Thank you.

  3. Great video! Thanks for posting!
    Got a question if I may (disclaimer: I am a rookie in options trading so it might be super silly)

    It seems to me that when long on options one should be looking for min theta/delta ratio with the following reasoning:

    When long one would presumably like to

    (a) minimize theta/cost (get the lowest theta for the cost to be paid for the option) and

    (b) maximize delta/cost (get the biggest increase for the option per cost paid).

    This leads by division to min theta/delta

    Is there a fault in the reasoning?
    (surprised if that is a silver bullet why there's not another greek calculating this directly)

  4. What if you have shares at a different price? Say a hundred at $125 and a hundred at $150 and another hundred at $175. Do you do three different options for the three different strike prices or one order for three options at the highest strike price? Tha k you

  5. So the option being exercised can ONLY be exercised on the exercise date? Meaning…I have 3000 shares of boeing….and i do a covered call with an expiration of 30 days…my average price is 158….i have a covered call at 175 strike price for 100 shares…..and say the price goes up to 182 WITHIN in the 30 days, does the covered call get exercised the second it exceeded 175?? OR can it ONLY be exercised on that 30th day?…If on the expiration day its above 175 it gets exercised and if below 175 it gets terminated useless…but it can ONLY happen on the expiration day and not at anytime WITHIN the 30 days….only the 30th day… i thinking correctly?

  6. What I do not understand is I thought you were selling the shares and collecting the premium but why does it look like you’re paying premium as well? ??‍♀️

  7. hey chris, gota question. If I bought 100 shares of the same stock for three days straight (total 300 shares), and I want to do a covered call. Do I get to choose which LOT to exercise? Thanks in advance.

  8. Greatly appreciate this video. I'm starting out on covered calls, plus a new brokerage account with Tastyworks. This clearly shows how to place a trade. Thank you!

  9. Great Video – easy to understand how to trade Covered Call. unless I missed something from the presentation, there was no mention of trading in and at the money advantages, if any , and no mention of Open Interest of the stock (volume trading )-Thank you again
    Michael V

  10. @projectfinance 4:35 You lost me here. The covered call seller is betting that the stock price stays below the strike price till expiration. The covered call seller is either neutral or bearish. So why would the seller KEEP the premium if it the share price goes ABOVE the strike price? This is so hard to understand as every options video out there conflicts with one another.

  11. I have been using Sell Put and Sell Call, to a) own good value shares, b) earn income from Premium [sell put, or even sell calls] However, In the recent down market, Sell puts have been assigned, and I have stocks, say assigned at $100 whose current market price is say, $20. there are no $100 options available (for 30-60 days).
    Not to sell the stocks at a loss, I wish to sell call for the $100 Stock at a far away (300 days expiry) that will earn me income / premium.
    If I after some time, I wish to cancel the sell call, by closing it out, say after 200 days, I know this is possible, but how do i know if I will profit from the premium (between sell put and sell call) ?
    Assuming the scenario that the extrinsic value (Strkie = market price) is equal at the point of closure, what would be the time decay impact on the final premium 9to pay) at closing of the option.
    I trying to figure out at what point over the 300 days, that the time decay is the worst, so i can close the sell put, before the decay. ?

  12. ????Thanks for an AWESOME VIDEO!!! U made covered calls easier to understand. So many tutorials assume people know all about covered calls & us beginners have a hard time following along. My question is:What specific criteria do u research when choosing a stock to write a covered call on? Thanks so much:)

  13. Thanks for video Chris. How much profit theoretically I can make by selling weekly calls, assuming you do not get assigned? Do you know if there is a way to calculate this? Thanks.
    Is it better to sell weekly expiry calls or longer dated calls, assuming you don't get assigned on both?

  14. To clarify, if the covered call option sold is not in the money (below option strike price) and I want to secure that premium as profit do I have to buy back that option I sold or just let the option expire through expiration date? Thank you and great video.

  15. How is there any down side potential at all if the option expires out of the money? Wouldn't you simply collect your premium, keep your stocks, and have no loss at all.

  16. I like this strategy, its its both bearish and bullish if your not greedy, if your upset about the call option reaching the strike price and getting an assignment and what opportunity you could of had if… who cares, you just profited anyways with low risk. You can always re buy the stock position around strike price if you see the stock rising and expect it will end up ITM and repeat. Best done with a stock you want to own, bonus if that stock pays a dividend.

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