Have you ever dreamed of kicking back and doing something that did not take a lot of time to create a pay check every Friday – where you get to pick how much? Well, this does not have to be a dream when you use Weekly Options. Covered call writing is a safe and considered conservative method of selling call option premiums on one’s stock holdings to collect rent. Covered calls are approved for 401K accounts and IRAs.
Why Weeklys? It’s the premium! Each week the options exchanges get to pick 5 stocks to offer weekly options, so you have to check every week to see if there have been any additions or deletions. In order to make a product and incentivize option writers, the premiums need to be higher than for a monthly write. How much higher depends on stock, the market and overall volatility. It’s not uncommon to get at least double using the four monthly writes. Another reason is that it is much easier to forecast over 8 days rather than a whole month. Another big reason is the ability to stay on the sidelines during earnings week! It’s nice to be able to take the dollars off the table and get back in when things settle down.
Selecting strike prices to write are also easier. Looking at the current trend on your favorite stock chart, it’s much simpler to judge if a stock is trending up, down or sideways. Depending on the direction, a writer can choose an out of the money call in an uptrend, a near the money call for a sideways consolidation or a deeper in the money call for a downward trend. If there are any adjustments to be made, they can be done easily when a new trend presents itself. Many times, even if the trend changes, the call may have already decreased in value from the Thursday it was originally written to close of business the following Monday. This is where time decay is truly an ally.
Another advantage with Weeklys is to use them for option spread trades. For many traders, stocks like Apple, Netflix, Price Line, or Amazon are too expensive to write. An experienced writer can sell either call or put spreads, or both, without owning the underlying stocks for great weekly premiums.
If the stock stays at or above the strike price of the put options old, then the premium is yours. If not, then you either take the shares at the put strike price or buy back the put. Many option writers sell puts in the hopes that the stock would be put to them; in other words, they are looking for their favorite stocks to be on sale and putt selling often achieves this.
In summary, if you are a monthly options seller, then consider the Weeklys for fun and profit. Done correctly, it turns every Friday into payday.
Tim Leary is a professional and writes covered calls, earning 3% to 5% monthly in up, down and sideways markets with limited risk. Get a free 50-page covered call writing report here. There is a call strategy for every market. The more you learn the more you earn.