Selling a covered call is a powerful yet simple technique that enables you to increase the cash flow from your stock.  Call options are available for trading on thousands of different stocks. 

The best way to learn about covered calls is to look at a specific example:

1. Buy 100 shares of Walmart Corp. (WMT) @ $53.93
2. Sell one WMT March 55 call option at $1.00 per share

Using the Bloomberg Professional Service we can easily model the resulting cash flow return on our example.  In line five below we see the annualized cash flow return is 12% – even if the price of WMT standstill or declines!

A detailed explanation of this analysis is beyond the scope of this post.  To learn more about options, I recommend the Options Industry Council’s extensive free educational materials especially the Investor’s Guide booklet.  For a personal consultation on how to use options to achieve your investment goals please call Successful Portfolios at (727) 744-3614 or click the help button at the top right of this page.