July 20, 2023                       Article : 369  

The premium that you receive for selling a covered call will depend on the strike price of the option, the expiration date, and the volatility of the underlying stock.

The higher the strike price, the higher the premium you will receive. However, the higher the strike price, the greater the risk that your shares will be called away.

The closer the expiration date, the lower the premium you will receive. However, the closer the expiration date, the less risk you have that the stock price will rise above the strike price and your shares will be called away.

The more volatile the underlying stock, the higher the premium you will receive. However, the more volatile the underlying stock, the greater the risk that your shares will be called away.

For investors with an active management style, covered calls can be a viable option for income. However, it’s important to remember that selling covered calls does limit your upside potential on a stock.