When writing a covered call, you’re selling someone else the right to purchase a stock that you already own, at a specific price, within a specific time frame. Since a single option contract usually represents100 shares, to run this strategy, you must own at least 100 shares for every call contract you plan to sell.
As a result of selling (writing) the call, you’ll pocket the premium right off the bat. The fact that you already own the stock means you’re covered if the stock price rises past the strike price and the call options are assigned. You’ll simply deliver stock you already own, reaping the additional benefit of the uptick on the stock.
We’ve collected four simple ways to get more from your investment strategy:
Tips for Writing Successful Covered Calls Part 1
You should considering working with stocks that have options with medium implied volatility. Why? Because they should provide enough premium to make the trade worthwhile.
Tips for Writing Successful Covered Calls Part 2
Just like any trade, there are tax considerations for writing covered calls. Take a clear view of your long-term positions and investment objectives before making your move.
Tips for Writing Successful Covered Calls Part 3
You’ve got to be ready for every contingency, including how to react if the stock goes down. Consider a buy-back strategy that will remove your obligation to deliver stock.
Tips for Writing Successful Covered Calls Part 4
Reducing your market risk is crucial when trading options. Buy-writes are a strategy that involves buying the stock and selling the call option in a single transaction.
Comment on this article
Shane on March 23, 2020 at 10:38am
I need to know how to write a covered call in your system, the exact steps and what it looks like in your system as I do it.
Ally on March 26, 2020 at 6:44pm
Hi Shane, please give us a call at 1-855-880-2559 or chat with us at ally.com, and one of our team members will be more than happy to help answer your questions.
Russell H. on May 25, 2020 at 10:19pm
Without specific examples, this is all greek. You should show a specific example of how this works.
Joe on June 27, 2020 at 3:58pm
This is garbage advice, your system is far too difficult to use. I just want simple to see how to do it in your crap system. Also the 800 number is constantly bogged down.
Shawn P. on July 9, 2020 at 5:52pm
I think Ally is a wonderful place to trade. Comment below must be from Robinhood account users? And anytime I’ve called , Since I opened my account back in 2015 or 16. I have received great service even at 3 o’clock in the morning. From a licensed broker! I have done very few options with Ally but I am happy. I can’t think of a single complaint to Make. And it’s not at five is that the person below is reading on covered calls. It’s the way that you do them no matter what brokerage, App, Exchange that you are using or think you’re using. And to back this up I will now start doing covered calls with Ally. Everything else is done with Ally is wonderful!
Ally on July 9, 2020 at 7:55pm
Hi Shawn, thank you for the comment, and for being an Ally customer. 😊
John S. on September 2, 2020 at 11:08pm
If I own a 100 shares of stock at $25 and it rises and I sell a covered call for $45 for a $1 for one contract and make roughly $100, and the stock goes above $45 and I give up the stock, am I correct that in addition to the $100 I made selling the covered call, I also make $20 for each of the 100 shares of the stock I owned that I wrote a covered call on , so I would have made $2000 on the stock rise plus $100 for the covered call, thus would have made $2100? Dr. John E Sandoz
Jay on November 20, 2020 at 4:31pm
Does Ally charge the seller of the call, when call option is exercised by the other party, when it is in the money and at the date of expiration?
Nick on December 24, 2020 at 11:55am
Are there any youtube videos that could walk me through a few examples for HOW to sell stocks in a covered call system using Ally Invest? I feel like I am chasing my tail looking through these articles and getting nowhere fast.
Ally on December 24, 2020 at 11:59am
Hi Nick, if you’ll please give us a call at 1-855-880-2559, or chat with us online at ally.com, one of our team members will be more than happy to help answer your questions.
David P. on January 31, 2021 at 10:02pm
So ive been with Ally for a few years now and I am so sick and tired of waiting for clear steps and examples of how to trade various strategies, specifically on your platform. I came over from tradeking and I really thought id be patient and you guys would deliver a clear guide to using ally. After 1 hour 50 minutes on hold (then I hung up,) last week, then 40 minutes (and hung up on Thursday,) and now the recent failures of you servers, and the convenient issues on Thursday with AMC, Etc. I have had enough. Look at the comments in here: 1. I need to know how to write a covered call in your system, the exact steps and what it looks like in your system as I do it. 2. Russell H. on May 25, 2020 at 10:19pm Without specific examples, this is all greek. You should show a specific example of how this works. 3. Joe on June 27, 2020 at 3:58pm This is garbage advice, your system is far too difficult to use. I just want simple to see how to do it in your crap system. Also the 800 number
HF on October 13, 2021 at 9:07pm
The title is "How..." You are starting with "When..." and never return to the "How".
Rich B. on June 9, 2022 at 11:49pm
I’m interested in publishing sponsored posts on your site. What do you charge to publish? Thanks, Rich
Ally on June 9, 2022 at 11:50pm
Hi, our team would be happy to answer your questions if you’ll give us a call at 1-877-247-2559.