Writing a Covered Call Can Help Protect Your Investment
Stock options can seem rather intimidating when it comes to investing. Many people buy and hold, some day trade, but options can be overwhelming for the average investor. However, one way to approach buying stock options in a more conservative manner is by writing covered calls on it. First, when you write a covered call, you either already own or you are going to buy the stock that you are writing an option for. This works kind of like collateral. Options can be a very beneficial financial gain to your portfolio if played the right way. However, they can stand to lose you a chunk of change on the wrong play. Writing covered calls is a more conservative approach to options that does not risk assets you do not even have at the time. Maybe you own 100 shares of "X" company, and then you decide to write one covered call for an option on those 100 shares at a certain price. That is how
It is also an agreed fact that writing a covered call can help protect your investment. Covered call writing is a good thing to keep in mind when you're looking for ways to hedge your bets. It's a great way to make sure that your losses are going to be minimal, and that's only if you're going to lose at all. As far as safety nets are concerned, you aren't going to find many options that are as simple as this one. But before you invest your money in anything at all, you have to do some research and figure out if it's going to work out in your favor. If you have to, pull some public records on the company and make sure that they're as good as you think they are. Speak to some of your friends, read the news, and cover all of the basics before you get in over your head.
Research and getting to know the company behind the stocks is a great way to minimize potential losses. Conducting you own due diligence on the stocks that you own or planning to buy will allow you to be bullish on the decisions you make because you are making informed decisions. The challenge now is getting directed to websites created by experts and professionals in the field who advocates the progress of the industry and is able to cater to both beginners and experts alike.
Information Source: BornToSell