ADVANTAGES AND BENEFITS OF COVERED CALL STRATEGY
‘The biggest advantage of covered call strategy is it increases and improves the odds of successful trading. Another biggest share tips benefit is that it can be implemented in two of the three possible stock movement scenarios. If the stock goes up, it’s profitable. Ifthe stock goes sideways, it’s profitable. The only case when it is not profitable is when the stock goes down. Any strategy that works 66% of the time automatically has higher oddsof success.
On the other hand, when buying either options or stocks, traders and investors make money only in one out of three possible eventualities. Which is if the stock goes in the desired direction. Also, the covered call puts a premium on time, as time passes you gain the time value of the option.
COVERED CALLS GIVES YOU BEST RETURNS OVER THE LONG TERM
Covered call writing has taken the stress out of stock market trading. The odds of making money in naked futures, options, and stocks are stacked against both the buyer and the seller. This is because their probability of making money is one out of three. Covered call is the only strategy in market stock tips which the trader makes money most of the time and even when he is wrong, the losses are lower than in the case of the other strategies. In the long bear phases, markets as well as individual stocks take years to form bases and move up. Covered call is a good way to make money during such periods. In India, the call and put buyers would actually need a miracle to make money in the fifteen trading sessions that there effectively are in a month. This is because there are eight to ten holidays in a money mantra month and in the last five days before expiry, the decay in time value is often higher or.equal to any favourable movement. In India, therefore, currently the covered call is as good as it can get.
In India a majority of traders dont write calls. One of the reasons is the myth that futures and options are inherently risky. On the contrary, as we have seen futures and options are option trading courses excellent tools for managing risk and returns. Like anything else they can certainly cause great harm if not used properly.
There is another myth that the option buyer is the smartest and the most risk averse person around, and that options are sold by people who are either gamblers or very rich since selling options is, theoretically, very risky. Neither of the above is true, particularly in the case of writing covered calls. In general the option buyer always gets a raw deal, and this is particularly true in India.
The logical reasoning behind writing covered calls is simple. It makes money and generally it does so better than most naked stock, futures or free share market tips options buying. Actually, the concept is so simple that people get confused and think they are missing something. The best part about the covered call is that it outperforms the other methods 70 to 75% of the time when market goes sideways.
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