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Covered Calls to Build Retirement Fund

By Edited May 12, 2015 0 0

People with disposable income are thinking of ways to invest their money in high yielding investment products that are not too risky. Some of them also want to set aside savings for retirement. This is where investing in stocks comes in. This industry provides the best opportunity to grow your investment using different strategies rather than just putting your money in the bank and earn small interest. There are a lot of strategies to use in stock investment but the most widely used is the covered call strategy.

 

When starting, you might use the buy and hold strategy. This is where you buy stocks and hold on to them and wait for their value to increase before you sell to make a profit. This is the most common for beginners because it is very simple to implement but it takes time waiting for any movement on the value of your stocks. Covered call strategy is arguably one of the best strategies in the stock investment industry. When you write covered calls on your stocks, you are selling the right to purchase your stock when it reaches an agreed amount for a premium. This contract is usually bound within a specific timeframe. This is a strategy used by the seller if he believes the market will not perform too well and he wants to make money through the premiums he adds on to his stocks in selling covered calls. On the other hand, a buyer participates in this strategy because he believes the value of the stock will increase more than what the agreed amount is. This way, he is able to purchase the stock at a discount and be able to sell the stocks to make a nice profit.

 

Either way, the best thing to do when dealing with the covered call strategy is research. Research to have an idea hoe the stocks will perform depending on market developments. Knowing the background of the company which the stocks represent and what their plans are for the future could give you an idea how the value would go. Using investment tools as well to research for the best covered calls available in the market is a great time saver. This tool is also highly adjustable to match what you are looking for. This could be your risk threshold or if you want to limit the search to blue chip companies. At the end of the day, it is still up to you to decide how you want to grow your investment using knowledge you will gain from quality research.

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