There are a number of strategies available to investors that use option contracts to generate attractive levels of income. Two strategies in particular that have become popular with individual investors are selling covered calls and selling puts. These strategies can be implemented through traditional brokerage accounts, as well as through qualified accounts such as IRAs. #-ad_banner-#Covered Calls: Investors purchase shares of stock and then sell call options against these shares. Selling the call options leaves the investor with an obligation to sell the shares of stock if the… Read More
There are a number of strategies available to investors that use option contracts to generate attractive levels of income. Two strategies in particular that have become popular with individual investors are selling covered calls and selling puts. These strategies can be implemented through traditional brokerage accounts, as well as through qualified accounts such as IRAs. #-ad_banner-#Covered Calls: Investors purchase shares of stock and then sell call options against these shares. Selling the call options leaves the investor with an obligation to sell the shares of stock if the price of the stock is above the strike price of the option when the option expires. Income is generated through the proceeds received from selling the call option contracts. Selling Puts: Investors sell unhedged or “naked” put option contracts on stocks that they expect to trade higher (or at least remain stable). Selling puts obligates the investor to buy shares of stock if the market price falls below the strike price when the option expires. Income is generated through the proceeds received from selling the put option contracts. One thing many investors… Read More