Thread by @gurgavin

WHAT ARE COVERED CALLS AND WHY EVERYONE SHOULD USE THEM TO MAKE EXTRA $$$$ IN THE STOCK MARKET.

THREAD 🧵

EVERYONE KNOWS THAT MOST OF THE OPTION CONTRACTS EXPIRE WORTHLESS. WHAT IF THERE WAS A WAY TO BE ON THE OTHER SIDE AND ALWAYS MAKE MONEY ? THERE IS ONE WAY ITS CALLED COVERED CALLS

(1/X)

WHAT ARE COVERED CALLS ??

COVERED CALL ARE TYPE OF AN OPTION TRADE WHICH INVOLVES SELLING A CALL ON SHARES THAT YOU OWN. BY OWNING THE STOCK YOU ARE “COVERED” IF THE STOCK GOES UP AND THE CALL OPTION EXPIRES IN THE MONEY.

(2/X)

LETS TAKE AN EXAMPLE I BUY 100 SHARES OF $TSLA AT $700 AND I AM OK SELLING THEM AT $750 IN 6 MONTHS. SO I SELL 1 $TSLA 16TH DEC $750 CALL FOR $132.30.

THIS WILL EARN ME $13,230 RIGHT AWAY WITH WHICH I CAN DO ANYTHING I WANT.

(3/x)

WITH THIS LETS TAKE 3 EXAMPLES OF WHAT HAPPENS IN 6 MONTHS

1) $TSLA GOES DOWN TO $650
2) $TSLA STAYS FLAT
3) $TSLA GOES TO $850

1) IF $TSLA GOES DOWN TO $650 I KEEP THE $13,230 AND THE OPTION EXPIRES AND I CAN SELL ANOTHER ONE TO EARN MORE $$

(4/X)

2) IF $TSLA STAYS FLAT I KEEP THE $13,230 AND THE OPTION EXPIRES AND I CAN SELL ANOTHER ONE TO EARN MORE $$

3) $TSLA GOES TO $850 I KEEP THE $13,230 AND MY SHARES ARE CALLED / SOLD AT $750

CAPPING YOUR UPSIDE IS THE MAIN DOWNSIDE FOR SELLING COVERED CALLS

(5/X)

HOW MANY SHARES DO YOU NEED TO START SELLING COVERED CALLS ?

1 LOT / 100 SHARES

CAN YOU SELL NAKED CALLS ( WITHOUT OWNING SHARES) ?

YES YOU CAN BUT MOST PEOPLE SHOULD STAY AWAY FROM IT AS YOUR DOWNSIDE IS UNLIMITED.

(6/X)

LET ME KNOW IF I SHOULD POST A THREAD ON CASH SECURED PUTS NEXT AND HOW I USE THEM TO MAKE MONEY WAITING FOR STOCKS TO GO DOWN.

(7/X)