Why Do You Need A Covered Call Screener?

The search for the perfect covered call stock doesn't have to take all day as it used to

. With modern software tools you can find all the call options that match whatever criteria you are interested in within seconds. After that you still have to do due diligence on the underlying stock but at least you have eliminated the vast majority of non-matching covered calls from your candidate list.

There was a time when it used to take all weekend to find decent trade candidates for investment. And doing all the calculations of annualized rates of return (so that you can compare options with different expiration dates) was incredibly time consuming. You could literally do it all weekend and still not come up with the ideal candidates. Fortunately, today's software makes it a snap. Just set the filters to your desired levels and instantly see matching trade ideas. From there you can research the shortlisted underlying stocks (make sure there are no legal actions pending, imminent earnings releases, etc.)

The best part is that the software is really quick at finding matching covered calls for whatever investment criteria you have. If you don't want to take earnings risk then you can use a screener that has a 'no earnings before expiration' filter. Or if you are implementing a dividend capture strategy you can use software that has a 'must have ex-dividend date before expiration' filter.

Having said that, it is still important to have knowledge of inner workings of strategies used in stock investment such as covered call premiums. When the market is flat, a covered call premium is a great source of income. You're not making (or losing) anything on the underlying stock (by definition, since the market is flat) and yet you can still generate monthly income from the premiums you get selling covered calls.

For each 100 shares of stock you have you can sell 1 call option. That provides the buyer the opportunity to buy your 100 shares of stock pre-determined price on or before a pre-decided date. If your stock is above the known price on that specific date then the buyer will exercise his right to buy. If the stock is below it, then the buyer will not buy and the option expires worthless. In a flat market the best strategy is to sell a call option that is slightly OTM. If the stock stays flat then you keep the stock and generate the most amount of time premium possible.

by: Shalo V

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