I have just found out about covered calls and cash covered puts. It seems too good for such little risk.
Anyone doing it?
Had to google. Here's my standard shameless cut and paste.
What Is A Covered Call & Why Is It So Popular?
A covered call consists of buying a stock and selling a call option against the stock.
For example, let's say you own a stock that is trading at $100 per share. If 30 days go by and your stock is still trading at $100 per share, you are obviously not making any money.
If you sell a call option at say strike price 105 with maybe 30 days to expire, you might get paid something like $2.00 per share for doing so.
Now, here's what can happen. If the stock goes up to say $110, you'll be forced to sell your stock at $105 and you'll still keep the $2.00 per share credit. In other words, you'll be up $7 per share instead of $10.00 per share had you just owned the stock.
In the stagnant trend when 30 days go by, you'll be profitable by $2.00 per share instead of breaking-even. This is why many enjoy covered calls because they can still make 2% or more per month in a flat market.
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