Covered Calls in the U.S. Market – Pros and Cons

Compound Stock Earnings (CSE) is the leading provider of covered call investment education services. At CSE we teach investors how to earn a 3 - 6% cash return per month investment regardless of the direction of the stock market. In this article, CSE gives the pros and cons of covered call investing in U.S. financial markets.

 Some advantages of writing covered calls in the United States include:

 • More stocks to choose from. The United States boasts the largest and most liquid stock and options market in the world. This allows U.S. covered call investors to be very selective in their investment and stock selection process, which, in turn, leads to a higher likelihood of positive investment outcomes.

             Read CSE’s book for more information on covered calls, “Covered Calls and LEAPS: A Wealth Option”, Joseph Hooper and Aaron Zalewski

 • Higher monthly covered call yields. The U.S. market is significantly more volatile than the majority of other developed foreign markets. As volatile markets are positive for option and covered call prices, U.S. covered call investors will normally receive higher percentage returns (yields) on covered call sales compared to other international markets.

            What are covered calls?

 • Access to information. There are some excellent information services that allow U.S. covered call investors to research and filter all covered call opportunities for the U.S. market. These services significantly assist you in selecting companies based on the fundamental and technical criteria you should use to select companies in which to invest.

           Want proof that covered calls works?

 • U.S. option contracts relate to only 100 shares. Generally U.S. option contracts relate to only 100 shares, whereas international option contracts relate to more than 100 shares. During your learning period, you can invest a lot less money in a U.S. covered call transaction than in some international markets.

 • Lower transaction costs. Due to the size of the U.S. market and the number of brokerage houses competing for your business, transaction costs are significantly less in the United States compared to most developed overseas markets. You will, therefore, be able to invest at a much lower rate of commission in the U.S. compared to most international markets. Saving on commissions equates to higher profits.

             How can I get started using the covered calls technique?

 Disadvantages of writing covered calls in the United States include:

 • Limited market hours. While your covered call activity should only occupy a few hours of your time per month, if you choose to invest in the United States you will need to work the hours when the U.S. market is open. If you are outside the United States, the time difference between your home country and the United States is a disadvantage for more investors.

           Help using the covered calls investing method

• Foreign exchange risk. If your country of residence is outside the United States, it is likely that you will also need to manage foreign exchange risk as you profits will be made in U.S. dollars. While there are techniques to use that will help manage this risk, it is an added consideration.

            See an informational video on how CSE uses its covered call system

 For more information on covered calls click here or contact Compound Stock Earnings at 817-882-9153.