What is a covered call, are they safe, how long will it take to learn to do a covered call

Question

What is a covered call, are they safe, how long will it take to learn to do a covered call

Answer 1

Covered calls are pretty secure.  You can do ("write") a covered call when:

1)  you own a stock

2)  you "write" (actually, your broker does this) a call contract on that stock

A call is a contract where you (as a "writer" or emitting party) give the buyer of the contrat the right to buy your stock at the promissed price.  The current price is usually higher than current market price for the stock.  The buyer will pay you a small amount for the contract, because he/she believes the stock will wildly move up in price.  If this happen, the owner of the call executes the contract, forcing you to sell the stock at the promissed (and now low) price.  Then he/she immediately sells it at the current high market price.  In this scenario, the buyer of the call contract realized a nice and almost instantaneus profit.  You would get a small profit, from the sale of the contract, but you don't get anything from the appreciation of the stock.

But many calls sold go unexercised.  Meaning that you would sell ("write) the contract, and the buyer would not force you to sell him/her the stock you own.  That is because the price of the stock did not move high enough for him/her to bother.  Upon expirantion of the contract (usually 30 days) you realize a nice small profit, and can get to write a new contract on the same stocks.  You can keep writing these contracts, upon expiration of the old ones, until someone exercices the contract.