Covered call writing can be used as a defensive investment strategy with which you can earn regular monthly profits. The huge hedge funds use them as well as the everyday traders because they are proven safe and effective. They can be exercised when the market is trending up, or in a down trend.

Choose your stocks carefully when using them for options. Top quality stocks with good dividends and high earnings per share make the best choices for options. Research them and know their story as well as any risk involved.

To be a successful options trader you must first learn how to do it. The basic process for writing covered calls is to buy some shares of a stock that you like, then write or sell a covered option against those shares for gains. You can also do this with shares that you already own. Option premium refers to the gains you make. At expiration time, there are two ways you can play out your trade. The first way is to sell the underlying stock and keep the gains or premium for your profits, or instead, keep the stock and write more options for the following month at expiration.

If your shares go down in value there is a way to handle it. By marrying puts to your covered calls you can still profit on the downside risk. A put is when you believe the stock will go down in value. Protection from calls and puts helps helps to limit your risk, and lock in profits. All investing does have risk involved, and you must learn to manage it wisely.

Statistics show that close to 90 percent of options end up expiring flat and worthless. This is good for the seller. At expiration time if your option has not been exercised then it will become flat and you will get to keep the premium.

It is important for any type of trading to have a plan of action. You need to know ahead of time what to do when the stock goes up or down. Pay attention to volatility as this plays a role in the price of options and how likely it is that yours will go up or down in the direction you want it too.

Covered call writing options is a good investment strategy that is beneficial in limiting risk and loss of capitol. It is possible to earn 3 to 10 percent a month using this strategy wisely. Always mange risk as this is a huge part of successful trading. Gain plenty of knowledge and skills before attempting to trade with this strategy. There is a lot of good information out there. Do the homework and trade intelligently.

For more information about covered call trading, check out https://www.borntosell.com. Covered call writing is a great way to create income.