Tackle Today: Covered Calls for Cash Flow
September 30, 2020
Last update: August 2021
≈ Do you use this technique? ≈
Traders,
One of the most popular techniques in the equity and options market is the Covered Call. A Covered Call involves the purchase of at least 100 shares of stock and then the sale of 1 call option against that stock. Within our Trading Playbook, you can find rules on how to execute the Covered Call, and you can also take the Tackle 25 course to learn all the strategies around selecting, entering, and managing Covered Calls.
In a market like this, where volatility is high, the premiums are going to be attractive to cash flow traders. Have you been trading Covered Calls? If so, you have probably also ran into some of the complexity of high volatility markets. When markets rip higher, your calls go in the money and it requires management and an understanding of what to do and how to read your position. Do you roll up? Do you stand pat and let the market take your stock? These are important questions to answer.
When markets rip lower, your calls lose their premium and can give you an opportunity to manage them by rolling down, out or even buying put options.
Some of the complexity can be reduced at entry as well. If a trader sells a lower delta when entering the Covered Call, it gives more cushion between the current stock price and the strike price you sell. This can reduce the volatility in the call option’s change in price and make the degree of difficulty go down some.
Tonight, on our YouTube channel, Coach Noah will teach some of his favorite was to trade Covered Calls in a market like this, and following that show, Coach Greg will be hosting our Tackle 25 mastermind group for the month.
It’s a night of Covered Call training, and if you use this strategy you should make sure you attend and have you pen and notepad ready to learn some new techniques.
#TeamTackle
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