For the covered call trade, there are two ways to approach this strategy. The first approach is based on the stocks that are already in your possession. If you have at least 100 shares of the stock and the stock is optionable, you can do a covered call trade. If you happen to have ownership in AAPL, AMZN, GLD, GOOG, or SPY, you can do mini covered calls on these stocks with a minimum of 10 shares and in 10 share increments.
The second approach to covered calls is through a buy-write. This is when you purchase the shares required for a covered call, and sell, or write, the option contract all together as one trade. There are many sites that can help find stocks for covered call trades. These sites are searching for the stocks that pay the highest premium.
However, the highest premium stocks are not necessarily the best stocks for a covered call trade. The premium is high for a reason. A high premium means there is an expectation of a potential big move in the future. The problem is the big move could be a move down and not a move up.
When a covered call trade is made, the risk is in holding the stock. A high paying premium may not be enough money to offset the loss occurred from a major drop in the stock price. For this reason, we need to make sure that we are willing to buy the stock and hold it for the period of the covered call and maybe longer. If the stock was not called out, we could do another covered call for the next month. This would mean that good, fundamentally sound stock should be considered, as well as a stock in a good industry. Analyzing the company, industry, and the chart of the stock should all be part of the covered call trade decision.
The covered call sites are a good starting point to find potential candidates for covered calls, as long as we do the other analysis. Two free sites that give you multiple choices are https://www.borntosell.com/ and http://www.oscreener.com/ . Both of these sites allow you to change some parameters to come up with different stocks.
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