subject: Facts Regarding Options And Covered Calls [print this page] There are several approaches one can take to enjoy market movement with some of the short term instability that comes along with it, while still protecting investment. How does this work, exactly? Let's go into it.
## What exactly are covered calls?
Covered calls are when you buy some shares of underlying stock, or you exchange options against it -- specifically traded fun and sell call ones. This brings in extra income. Normally you (being the investor) keeps an unbiased or neutral short-term outlook on the investment, although you can hold a long position while also pulling off a short with an option.
## What are option credit spreads?
Option credit spreads involve similar (or identical) Treasury securities that have different ratings of quality. You sell a high premium option and buy a low premium option and earn on the difference.
Using both technical indicators and fundamental analysis, there are algorithms which can evaluate the range and direction of a market. Regardless of whether a market is rising, falling or even sideways, a good system of options picks can predict the market ups and downs.
## How to Use Options to Make Investments
If you decide to use options as a planned investment, it can advantage the trader in a lot of ways:
- possess share of a corporation or fund at better value - get remunerated for the underlying as well as the dividends - reduce the risks of owning underlying - reduce the costs of owning underlying
When you're into covered calls, option credit spreads or anything as such, it's necessary for you to block any kind of hype or noise. The key is to sticking to one system or program. If you find your form of analysis and your calculations working well, then hang on to the roadmap you have come up with.
Jumping from one system to another because of the newest trend or buzz in the industry will lead to frustration and ultimately failure. Finding options as a strategic investment mentor may take some time, but once you have found a system, follow the plan and be excited about your learning and your discipline, not your short term results.
