In simple words, Covered Calls are contracts made on options to create income. But it’s a little more complicated than that… How are they performing? Do they provide the income you need? Are they safe? What are the tax implications? We’ve received so many questions about them this year that we’ve decided to gather the answers in a full-length episode.
- Mike starts by giving a lengthy definition of what’s a covered call and the two scenarios that could happen.
- Vero wonders the difference between call options and put options in covered calls? While the put option works the same way, its goal aims to protect your gains.
- Can investors do covered calls on any stock options? How can investors choose the right stocks? Having a demand for a stock surely helps.
- Are there any types of stocks that investors should avoid when doing covered calls?
- To many investors, covered calls are safe income investments because if the stock goes down, you don’t have to buy it, and if it goes up, you already make a profit. Mike details his thoughts on this statement.
- Are there any factors investors should consider when timing the execution of covered call strategies? And is it a dangerous side of this strategy?
- The market has been hard on investors lately. Should they adapt their covered call approach to different market environments?
- Are there any tax considerations that investors should be aware of when using covered calls?
- What are the benefits and risks of using covered calls in an investment portfolio? Should investors do them?
Want to know about more ways to generate income from your portfolio? Go back to the Dividend Income for Life complete series below (includes links to previous episodes)!
10 Years Later, DSR Still Solves Investors’ Main Struggles [Podcast]
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The post What’s a Covered Call and Should You Do It? [Podcast] appeared first on The Dividend Guy Blog.