Adding an income strategy to your portfolio can be a good thing to help manage risk and grow your account.
The covered call Strategy is a great way to do this, especially if you have stocks in your account.
We’ve found that adding discreet calls to your arsenal can be a good idea. But how do you choose which stocks and options to use?
Go to the Covert Call screener, which you can use to assemble a covert call.
Many websites offer these services to investors, some for free, some for a fee.
A covered call screener is basically software that allows you to select your inventory and covered call options based on criteria that you set using filters.
Sounds good so far.
What filters can help you set up a covered call?
- Timeframe – How far in the future do you want to sell your call?
- Stock – You can provide a list of tickers, P / E ratios, all possible implied and historical volatility measures, dividend ratios, prices, and the list.
- Option – Would you like to specify bid-ask spreads, open interest or a specific delta?
- Trade – You can set minimum trading targets, such as: B. Avoid or seek probability of winning, delta or theta, and even winning or dividend events.
- Return on Investment – Setting minimum, maximum, and average return on earnings targets is a great way to benchmark covered call opportunities against one another. This choice requires a little more discussion as it involves calculations rather than just picking a value. The calculation is based on a number of factors including the implied volatility of the underlying asset and the current price. This information is used for all tickers and the expected returns are calculated over the period of trading. This gives us the opportunity to compare different covered call trades on an equal footing.
When I set up a covered call, I like to start with a good solid warehouse I don’t mind holding
If you want to make your own list of stocks, do so on the Covered Call Screener or use the Stock Screener on your broker’s website to identify the stocks you want to use.
At the very least, I’d suggest making sure that the liquidity of the underlying stock and options is very good, the stock price is above $ 10 per share, and the implied volatility doesn’t go crazy (> 60%).
It is up to you to find out what additional criteria are important to your trades.
I also like to avoid profit and dividend events, like trades with a timeframe of 30 to 60 days, and aim for an average expected return that is high on the list.
Free covered calls course
An additional note on the maximum price of the share.
You need to buy 100 stocks to make sure your account can adequately support the purchase.
If you want to allocate $ 5,000 to this strategy, limit your stock price selection criteria to $ 50 per share ($ 5,000 / $ 100).
As you may have guessed by now, there is nothing magical about having a covered call screener.
It’s just about applying filters and doing math behind the scenes.
We can do it ourselves if we want, but it’s nice when someone else does the heavy lifting so we can just use the results for action.
We shine when we act, don’t we?
Here is a short list of several covered call reviewers.
I’m sure you can find a lot more if you go hunting.
bar graph – $ 29.95 / month with discounts for 1-year or 2-year subscriptions.
OptionDash – $ 39 / month with discounts for a 1-year subscription. They also have a basic free version to start with.
Optionism – $ 35 / month with discounts for a 1-year subscription.
Quantcha – $ 89 / month.
Born to sell – $ 59.95 / month with discounts for 3-month and 1-year subscriptions.
TD Ameritrade – Free if this is your broker.
As an example, let’s use TD Ameritrade’s options screener to find a covered call trade.
After logging in, go to “Research & Ideas” and click on “Options” in the “Screener” category (see below).
When the screener page opens, click the Create Screen tab.
On the left side of the screen you will see all of the criteria available for selecting your trade.
If you move the mouse over the criteria elements, the details of the criteria and their use are displayed in a popup.
I will select “Strategy Type”, “Key Rating”, “Assigned Response Rate” and “Days to Expire”. After choosing my criteria, I set the values I want for each, as shown below.
I changed the “Results View” to “Trade” and clicked the “Show Matches” button after entering my criteria settings.
I now have a list of 5 possible covered call trades that meet my selection criteria.
I have had good results with FSLR in the past. So let’s look at this trade.
I clicked the “Trade” link next to FSLR and am directed to the “Buy & Sell” page.
Now the details of the trade are presented to us.
How much shares to buy and which call option is specifically to be sold. I also know that I would have to spend around $ 9,000 to get into this trade as it is.
I am also free to change the trade if I wish.
Maybe I don’t want to easily sell the call to ITM. I
can change that if i like and sell a $ 101 strike instead.
When I’m done, I can click Check Order to start executing the trade.
Covered call screeners can be a great way to find trading ideas. If you’ve used any of the platforms above, please leave a comment about your experience with them.
Disclaimer: The information above applies to For educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are unfamiliar with exchange-traded options. All readers interested in this strategy should do their own research and seek advice from a licensed financial advisor.