Generating income with covered calls

Overview

If you'd like to generate some additional income from your portfolio, writing covered calls may be the strategy you're looking for. This course will teach you how to use this strategy to generate income while adding a small amount of downside protection in the process.

Objectives

When you complete this course, you will be able to:

  • Explain the benefits and risks of selling a covered call
  • Select a strike price and expiration date that meets your objective
  • Assess alternatives if your objective changes or your forecast for the underlying is incorrect
Course Outline
Title Type Highlight
1. Basics of call options Article
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If you are not familiar with call options this lesson is a must. Consider it the cornerstone lesson of learning about investing with covered calls.

If you are not familiar with call options this lesson is a must. Consider it the cornerstone lesson... More
2. Why use a covered call? Article
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Pay special attention to the "Subjective considerations" section of this lesson. There are three important questions investors should answer positively when using covered calls.

Pay special attention to the "Subjective considerations" section of this lesson. There are three... More
3. Anatomy of a covered call Article
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Investors should calculate the static and if-called rates of return before using a covered call. This lesson will show you how.

Investors should calculate the static and if-called rates of return before using a covered call.... More
4. What is a covered call? Video
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A covered call is an options strategy where an investor holds a long stock position and sells call options on that same stock on a share-for-share basis in an attempt to generate income.

A covered call is an options strategy where an investor holds a long stock position and sells call... More
5. Expert recap with Larry McMillan Video
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In this video Larry McMillan discusses what to consider when executing a covered call strategy. Pay special attention to the possible tax consequences.

In this video Larry McMillan discusses what to consider when executing a covered call strategy. Pay... More
6. Selecting a strike price and expiration date Article
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In this section, Probability of being assigned, take note of the table explaining the mathematical probabilities of assignment.

In this section, Probability of being assigned, take note of the table explaining the mathematical... More
7. Using the probability calculator Video
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The Probability Calculator may help you select a strike price by analyzing the likelihood of the underlying stock trading at or between price targets by a specified date based on historical volatility.

The Probability Calculator may help you select a strike price by analyzing the likelihood of the... More
8. Selling a covered call on Fidelity.com Video
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In this lesson you will learn how to sell covered calls using the option trading ticket on Fidelity.com. The option trading ticket will help you find, evaluate, and place single or multi-leg option orders.

In this lesson you will learn how to sell covered calls using the option trading ticket on... More
9. Selling a covered call in Active Trader Pro® Video
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Now let’s learn how to execute your trade using the option trading ticket in Active Trader Pro®.  You can enter single or multi-leg trades and analyze the potential profit, loss and breakeven points within the trade ticket.

Now let’s learn how to execute your trade using the option trading ticket in Active Trader Pro®.... More
10. Rolling covered calls Article
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Stock prices do not always cooperate with forecasts. Also, forecasts and objectives can change. As a result, investors who use covered calls should know about the basic “rolling” techniques in case they are ever needed.

Stock prices do not always cooperate with forecasts. Also, forecasts and objectives can change. As a... More
11. Tax implications of covered calls Article
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Investors who use covered calls should seek professional tax advice to make sure they are in compliance with current rules.

Investors who use covered calls should seek professional tax advice to make sure they are in... More
12. Generating Income with Covered Calls - Checklist Course
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Use this checklist to helps to ensure consistency and completeness before executing your covered call strategy.

Use this checklist to helps to ensure consistency and completeness before executing your covered... More