How to Become Landlord of Your Stock Portfolio
Ever dreamt of being a landlord but for your stock portfolio?
Welcome to the world of covered calls where you get to "rent out" your stocks.
It's where you call the shots, collect the rent, and grow your portfolio. You can think of each stock as a rent-generating apartment that can turn your portfolio into an income producing machine!
How Do Covered Calls Work?
To trade a covered call we need to own (or buy) 100 shares of a stock and then sell a call option against that stock position.
The goal is to generate income from the stock holding in addition to any dividends. The premium received from selling the call also covers a small decline in the stock price. However, the tradeoff is that stock gains are limited above the call option strike price.
High volatility stocks have the highest return potential with covered calls, but they also have the highest risk of an adverse price movement. Its all about finding a strategy that fits the investors risk tolerance.
Lets look at a few examples using Barcharts Covered Call Screener.