Generate Passive Income with this Options Strategy - How to SELL CALLS for Beginners

COVERED CALL OPTIONS are an easy source of PASSIVE INCOME! In this video, I'll explain how to sell covered calls to help you make some simple side money!

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📄 Video Description 📄

🤓 Fundamentals On Selling Covered Calls
Most of you have probably already bought a call option before. When you purchased that option contract, you paid another trader (the seller) PREMIUM to put on that trade. The seller of the option receives that premium from you up front. For most stocks, you can sell options up to 4 times a month, once a week, creating a simple form of passive income. For example, last month I sold just 2 call options on Workhorse for $171 which is more than 10% of my initial investment. For me to sell these covered calls, I needed to own 100 shares of Workhorse, which I bought at $16 for a total investment of $1600. In order for YOU to sell covered calls, you will also need 100 shares of a single stock. Without this, selling call options would come with unlimited risk since a stock price theoretically has no cap on what it could reach, meaning the option you short could gain unlimited value. To protect you from this, when you sell a covered call, you put 100 shares of the underlying stock down as COLLATERAL. Once your option becomes IN THE MONEY, the buyer of the call option could then execute it, forcing you to sell your 100 shares at the strike price you chose. It's unlikely the buyer would actually go through with this since they would lose out on all the extrinsic time value left in the contract. If your covered call option EXPIRES in the money, the buyer has no other choice than to execute the contract, meaning you will have to sell your 100 shares at the strike price you agreed on. On the other hand, if the call option expires OUT THE MONEY, then you will keep your collateral (the 100 shares) and the premium that the buyer paid you. At this point, you can rinse and repeat this strategy, putting your 100 shares up as collateral over and over again, until your luck runs out and you have to sell your shares.

📈 Stocks for Selling Covered Calls
Possibly the best stocks to sell covered calls with would be dividend stocks, this way you will get paid dividends for holding 100 shares of the company on top of the weekly premium you'll be receiving from your covered calls. AT&T is a great example for this, and it's relatively cheap at just $2800 for 100 shares on their stock. For this, you will get around $40 per week in premium and $50 dividend paycheck every quarter. This adds up to $2300 per year! Dividend stocks are safe for covered calls, but they might not offer the best return. A stock like Microsoft gains 70% in value on average, and continuing to sell covered calls over the years on their stock would result in you receiving around 70% more in premium each year as well. $20k is a lot to lock up when buying 100 shares of Microsoft, though, so you might want to look into big banks. Both Bank of America and Wells Fargo stock are under $25 and they pay around $30 a week in premium, around 1% of your investment, which isn't bad but it's not a lot. If you want a high return on selling covered calls, you need to go with riskier stocks such as Tesla, Square, or Workhorse.
⏱ TIMESTAMPS ⏱

Introduction: 0:00
Fundamentals of Covered Call Options: 0:48
Example of Selling a Covered Call (Robinhood App): 4:03
Best Stocks for Covered Calls: 5:41
Discord/Outro: 9:13

🏷 TAGS 🏷

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⚠️ DISCLAIMER ⚠️

I am not a financial advisor. This video is for entertainment and educational purposes only. You (and only you) are responsible for the financial decisions that you make.

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