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The Biggest Mistake New Call Writers Make

Dec. 13, 2011 4:42 PM ET
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Covered call trading is not like directional trading which has an objective to time the movement of a stock in the direction it is moving. Covered writing is a game of regular, incremental returns. The covered call writer’s objective is to collect the option premium for income without taking any damage to the downside of owning the stock. The secret to success for the call writer is to make smaller, more consistent returns compared to a advanced option trader who makes many bets waiting for a 50% – 100% winner. The biggest mistake by new call writers is writing a stock solely to capture the fattest time value premiums.

Read more about covered call volatility.

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