Search this site »

Covered Calls and Investment Risk

Posted by Compound Stock Earnings in Dallas-Fort Worth-Arlington, TX on Sep 24, 2008

Compound Stock Earnings (CSE) teaches their clients how to consistently generate cash income of 3-6% per month from their investment portfolios by writing covered calls. After twenty years of using covered call writing to grow his own wealth, Joseph Hooper founded CSE to teach others how to successfully implement his covered calls technique.

Options trading has been touted as a high risk venture, and if you don’t do it right, it certainly can be. For example, let’s take a look at a common option purchase. An investor purchases an option, which gives him the right but not the obligation, to buy 100 shares of a certain stock at $80 per share by a certain date. The stock then drops down to $75 per share, and the investor declines to purchase the stock. In this case, the option expires and the investor loses the money he paid for the option. Now he has no stock to rise in value, and he has no option. All he has is less money to invest.

That is not the type of option transaction you will be completing if you follow Compound Stock Earnings’ approach to writing covered call options. They will teach you to “catch” the money option buyers toss away, and keep your stock, too. You can use your stocks to deliver cash income even if the price of your stocks drops. How? You simply write (sell) a covered call option giving the buyer the right to purchase your stocks at a certain price, say $80. They pay you directly for the option, and you keep the stock. If the stock drops to $75 and the option buyer chooses not to purchase your stocks before the option expires, you keep the money they paid you for your option, plus you still reap the benefit of owning the stock when the price goes back up. This transaction is an example of how to write covered calls, and it can be very profitable.

To demonstrate the risk of buying Mutual Funds as compared to writing covered calls, let’s examine the control issue. A Mutual Fund manager makes very good money for shifting investments, maybe your investments, from this stock to that one. Have you ever had to pay income tax on capital gains from your Mutual Fund, even though your year-end fund balance was lower than your invested amount? Where did all those gains go? Ask the fund manager, because you know he got paid. Do you see the risk involved in letting others manage your money? You can’t be sure they know what they are doing. And even when it seems like they do, there is a risk of them getting replaced at any time by a less savvy manager.

Covered calls investing is like renting out your stock, to put it very simply. Compound Stock Earnings can teach you how to write covered calls that allow you to realize income while still holding your stock. With over twenty years of experience, Joseph has continued to improve his methods so you can avoid the long learning curve and can start writing profitable covered calls as soon as possible.

Compound Stock Earnings offers several different teaching methods so you can learn how to write covered calls your way. And whichever method you choose, the staff at Compound Stock Earnings will be there to guide you. Their market leading client support system puts full telephone and email support for writing covered calls at your fingertips.

To learn more about writing covered calls and the educational services offered by Compound Stock Earnings, visit the website or call CSE at 817-882-9153.