Writing Covered Calls in a Bear Market
Writing calls has enjoyed a surge in popularity due to the country's poor economy in the past few years. This form of investing is considered fairly safe and typically investors earn a profit. Actually, investors frequently write calls so that they can have a dependable stream of extra income each month. In order to have the opportunity to write a call, investors must buy stocks that have options. He or she can then sell calls to other investors at a set price, known as a strike price. It should also be noted that calls all have expiration dates.
While investors typically have the most success writing calls for long-term holdings that are remaining fairly steady in price, this investment plan is rather flexible. For instance, many investment professionals urge their clients to write calls even in bear markets, when few other investment methods are effective. Below are some tips to help you maximize the potential of writing calls in volatile markets.
1. Don't Invest Money You Don't Have
While this may seem like an obvious suggestion, investors frequently feel that earning a profit from covered call investments is a sure thing, so they start investing money that they don't yet have available or that is needed to cover other bills. The results of this can be horribly detrimental. Therefore, especially in a bad market, it is vital to only write covered calls using money you have available to invest. While writing covered calls is generally thought to be a safe way to invest, there is always a chance that a bad market will surprise you and you won't turn a profit.
2. Choose Your Trades With Caution
When the market is good and stock prices are increasing every day, there is little concern when it comes to choosing your trades for calls. You might even find that you can earn money without researching for even a brief period of time. In a poor market, though, you have to consider your trades more seriously. It is vital to write calls only on those companies that have no financial problems and aren't experiencing any other issues that could affect stock prices.
It is not a good idea to start writing www.borntosell.com covered calls without discussing your decision with the professional who manages your investment portfolio. Ask him or her to help you choose stocks in your portfolio that would be good for covered call Born To Sell investing. This is especially helpful if you don't have much knowledge of various companies' situations.
While investors typically have the most success writing calls for long-term holdings that are remaining fairly steady in price, this investment plan is rather flexible. For instance, many investment professionals urge their clients to write calls even in bear markets, when few other investment methods are effective. Below are some tips to help you maximize the potential of writing calls in volatile markets.
1. Don't Invest Money You Don't Have
While this may seem like an obvious suggestion, investors frequently feel that earning a profit from covered call investments is a sure thing, so they start investing money that they don't yet have available or that is needed to cover other bills. The results of this can be horribly detrimental. Therefore, especially in a bad market, it is vital to only write covered calls using money you have available to invest. While writing covered calls is generally thought to be a safe way to invest, there is always a chance that a bad market will surprise you and you won't turn a profit.
2. Choose Your Trades With Caution
When the market is good and stock prices are increasing every day, there is little concern when it comes to choosing your trades for calls. You might even find that you can earn money without researching for even a brief period of time. In a poor market, though, you have to consider your trades more seriously. It is vital to write calls only on those companies that have no financial problems and aren't experiencing any other issues that could affect stock prices.
It is not a good idea to start writing www.borntosell.com covered calls without discussing your decision with the professional who manages your investment portfolio. Ask him or her to help you choose stocks in your portfolio that would be good for covered call Born To Sell investing. This is especially helpful if you don't have much knowledge of various companies' situations.
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