Tim's Corner: Trading Covered Calls
Specializing in biotech stocks, Small Caps, managing optimized portfolios
Seeking Alpha Analyst Since 2009
Finding tomorrow's big winners in the lucrative biotech sector, The Biotech Forum focuses on proprietary, breaking research on promising biotech and biopharma stocks with significant potential for outsized alpha. It is the fourth most subscribed to investment service offered through the Marketplace on SeekingAlpha.com. Our service offers a model-20 stock portfolio as well as the most active Live Chat on the Marketplace. This is where scores of seasoned biotech investors trade news and investment ideas back and forth throughout the trading day.
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Specializing in profiling high beta sectors, Bret Jensen founded and also manages The Biotech Forum, The Insiders Forum, and the Busted IPO Forum model portfolios. Finding “gems” in the biotech and small-cap stock sectors, these highly volatile spaces proven hugely successful have empowered Bret Jensen's own investing portfolio.
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Learn more about Bret Jensen's Marketplace Offerings:
Rationally speaking, blaming one's behavior on alcohol or drugs is like blaming the ladder by which you descended into a pit, or the staircase that took you down to a cellar, for what you found there.”― Graham Joyce
This instablog post is sponsored by Tim Plaehn, expert on income investing and a friend & colleague of mine at Investors Alley as well as a contributor here on Seeking Alpha. Tim runs the Dividend Hunter newsletter which offers a solid & diverse selection of attractive high yield plays. The service now nearly 10,000 active subscribers and can be had HERE for the rock bottom price of $49 (It usually is $99) for the first year. Tim provides a solid selection of lower beta, high yield recommendations for these challenging times.
Ignorance is a progressive thinker’s enemy; acceptance, awareness, accountability and action are the tools of the informed; of people who want change and do all they can to achieve it.”― Carlos Wallace
By Tim Plaehn,
Our covered call recommendations service – Weekly Income Accelerator – is popular with investors who have not previously traded options. Doing covered calls for extra income is a natural extension of the high-yield investing strategy I lead with the Dividend Hunter service.
If you are like many who join us, you may quickly find that your brokerage account doesn’t currently let you trade options. We can fix that.
To be able to trade options, the brokerage firm with which you have your investment account must grant you options trading authorization. Your broker requires additional information and an application to become options authorized.
Brokers assign a range of options trading authorization levels. Your broker will have four or five different levels. Like many things in investing, each broker assigns levels a little differently. Here are three examples.
This table is from Investorplace:
Our friends at Fidelity offer different levels between regular and retirement brokerage accounts:
The folks at Charles Schwab decided that creating a Level 0 (zero) for covered calls makes more sense than just using Level 1, like other brokerages. It does not, but that’s how they roll:
The obtain authorization, you either fill out an authorization request form or give your information over the phone to a broker’s registered representative. I suggest calling first to determine the easiest path.
Here is the best news: you only need options trading Level 1 for covered calls. Anyone with a brokerage account and money to invest will be approved at a minimum for Level 1 (Level 0 at Schwab) options trading.
Even if you currently don’t have plans to trade options, it is a good idea to have options authorization added to your brokerage account. At some point, circumstances may turn your authorization into a feature that becomes important to your financial health.
In one case, you're hoping someone else will do the right thing. In the other case, you're directing your own life, even if someone else does something stupid. Guess which path is going to be more successful.”― Dennis Prager
Tim Plaehn of The Dividend Hunter has developed a monthly dividend calendar. It is yours free when you click here.
Thank You & Happy Hunting,
Bret Jensen
Founder, The Biotech Forum, The Busted IPO Forum & The Insiders Forum
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.