Every day, transactions of billions of dollars happen on the Australian Securities Exchange (ASX). Some of these transactions are made by big financial institutions while other transactions are made by well-known insurance companies. One of the techniques used by the gurus of Australian share market to generate consistent income is writing (selling) covered calls. Writing covered calls is a simple technique, which is eminent among institutional traders, but a mysterious one to the novice or self-directed investor despite being lucrative and even deemed “easy” by ASX itself. In other words, you do not need to be a share market genius in order to learn and try writing covered call.
Most investors probably invest in share market in order to yield consistent monthly income from their portfolios. Instead of investing in popular mutual funds or purchasing and holding certain stocks hoping for a rise in their value, why not devote some proportion of your account writing covered calls every month? The versatility of covered calls Australia can generate consistent monthly income for any investor with a trading account. In order to generate consistent monthly income with covered calls writing, however, obtaining the proper options trading education is vital.
Here is how covered call options trading in Australia works:
If an investor has 1000 shares of Telstra stock at A$ 5.00 per share and is ready to sell those for a profit, that investor can sell or give away the right to someone to buy their shares at A$ 6.00 per share. In the terms of covered calls Australia, the investor would be selling the right (with obligation excluded) to someone to purchase their Telstra shares at the A$ 6.00 strike price. The income that the investor gets from selling the rights to someone is called premium. In our case, the premium for writing a thirty-day option is A$ 1.00 per share.
Like any other investment strategy, there is a downside to writing covered call options. If Telstra shares should rise to A$ 9.00, in the above case the investor would be obligated to give away or sell their shares at A$ 6.00. If Telstra shares never cross A$ 6.00 until the date when the option expires, the investor is eligible to keep their shares as well as premium income. The key to successful covered calls Australia trade is to know which particular stocks to hold for writing covered calls and which ones to invest in for the long period.
For quite some time now, writing covered calls in Australian share market has been a top technique used by professional investors to generate guaranteed monthly income. You too, no matter if you are a novice, can try writing covered call option in order to create steady monthly income. With covered calls Australia, risk is low, and income is consistent.
To know more about covered calls Australia, contact the vastly experienced options trading experts at Total Options www.totaloptions.com.au. They can give you deep insight on covered calls and can also provide excellent Australian share market advice.