How To Create a Covered Call Strategy Tutorial on tradeMONSTER

The tradeMONSTER trading platform affords you a quick and easy way to create a covered call strategy, without having you jump through a lot of hoops.

Don’t stress over navigating a complicated plaform while attempting to implement a strategy. Watch this YouTube video for a demonstration on how easy it is write a covered call with tradeMONSTER

Transcript

0:01 Want to acces all the innovative trading tools on tradeMONSTER.com completely
0:05 free?
0:06 Stay tuned to the end of the podcast to find out how.
0:08 <music>
0:21 Welcome to tradeMONSTER.com video trading podcast.
0:24 This is Episode 8, “Creating a Covered Call Strategy”,
0:27 presented by tradeMONSTER’s own
0:28 Travis McGhee.
0:30 This video i’m going to demonstrate a quick and easy way one can go about
0:33 creating a covered call strategy using the tradeMONSTER trading platform.
0:36 You will notice to the left here I have my current positions. For the purposes of
0:39 this demonstration I am actually going to use
0:42 a long stock position that I have in Wells Fargo, WFC.
0:44 Where I am currently long 100 shares of stock. This is for educational purposes
0:48 only.
0:49 What I want to do today is take my long stock position and cover it with a call.
0:53 So I am going to left click on Wells Fargo and it is going to direct me to my quote
0:57 screen.
0:58Here you will notice that you have various selections that you can make. One of
1:01which is the options icon.
1:02 If I were to left click here it would direct me to the Wells Fargo options quote
1:06 screen and I could go about creating my covered call strategy that way, manually.
1:10 But what I want to demonstrate today is how the tradeMONSTER platform can
1:15 actually create the strategy for you.
1:17 So if you go down to the bottom left-hand corner and left click on close/adjust, its
1:21 going to direct you to a new screen where you have five different strategies to
1:26 choose from.
1:27 Seeing as how we are talking about covered calls and covered calls being
1:30 an income producing strategy, we will want to left click on income.
1:33 So what the computer has done is it has automatically matched us up with
1:39 1 Wells Fargo June 2010 28 call.
1:42 Against our long 100 shares of stock.
1:45 It is going to default to the front month, which in this case is June 2010, and the
1:51 at the money strike.
1:52 You can see in the right hand corner where we have a streaming real-time
1:55 quote. Wells Fargo is currently at $27.71.
1:58 So the $28 strike is the at the money.
2:01 Now we can change this to match our needs.
2:03 All we need to do is just go down to the bottom left hand corner.
2:06 Left click on add/edit legs.
2:09 And we can customize our strategy.
2:11 So from this screen, lets say over here at expiry month I wanted to go out.
2:16 I can click on my drop down and change that to July 2010.
2:20 And lets say I wanted to adjust my strike price a little bit I could change that
2:24 to the 30 strike.
2:26 So now I have manually adjusted my strategy to sell 1 July 2010 30 call.
2:32 Against my 100 shares of stock I currently have.
2:35 Now before I go and create this order say you want to analyze your strategy.
2:40 I left click on analyze down here on the bottom.
2:42 What you are going to want to do though, because what you are doing right now is
2:48 analyzing the naked call, so you are going to want
2:51 to analyze the strategy as a whole.
2:53 So left click on adjustment and go to adjusted strategy. And here you
2:58 will be able to see your 100 shares of stock with your 1 short call.
3:02 And essentially look at the covered call strategy.
3:05 So you have here your maximum profit, maximum loss, your break even’s, your
3:10 risk/reward, as well as some important events that you need to watch out for.
3:14 Expiration, next earnings and next dividend.
3:16 So once you are comfortable with the strategy you have on, with the strike and
3:21 expiry month you can go to create order.
3:23 So I left click here, it directs me to a screen.
3:26 Im already long the stock so all I need to do is sell my one call.
3:29 So from here I can sell my 1 Wells Fargo July 2010 30 call and I can adjust it for
3:35 price.
3:36 If I wanted to be in between you can see that the current bid is .53 and offer is .54.
3:40 I can either sit on the bid or take the offer. Or I can change this to a market order.
3:45 Whatever works best for you.
3:48 And then you would just go and confirm your trade.
3:50 And that is how you go about creating a covered call strategy using the
3:52 tradeMONSTER trading platform.
3:54 Go to tradeMONSTER.com to get access to all of our tools and educational
4:00 resources for proactive investors like you.
4:03 Every brokerage account gets free access to our paper trading practice platform!

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