Learn How to Use a Covered Call in Binary Options Trading Strategy
Learn How to Use a Covered Call in Binary Options Trading StrategyMay 6, 2012
A covered call is one of various binary options trading strategies where online traders can hold a long position on an underlying asset as well as a call option on the same asset trying to produce more income on that specific asset.
This strategy, (also referred to as a buy-write) is often used when investors have a short term or neutral outlook on the underlying asset and therefore hold the asset long while at the same time take a short position on the option to produce higher profit margins from the option premium.
Now let’s say that for all intents and purposes you already have shares you are holding on to from previous purchases, this would be called an overwrite in trading lingo. The stock will be held in the same brokerage and in most cases an account from which the trader makes the call trade, thereby creating a type of collateral or “cover” of the obligation which is conveyed by writing a call option contract. This strategy can be used in binary options trading and is considered to be relatively simple and effective. Investors use this type of hedging strategy to combine stock ownership with the much needed flexibility of listed options.
So before you start your endeavors in binary options trading, its highly recommended you have a serious look at some of the basic trading tools and strategies out there (there are quite a few), and start thinking about a binary options strategy that is right for you. You would need to look at the right trading signals, and develop the trading system accordingly. It’s always worth to be cautious before you start investing, because you wont be able to turn the clock backwards. Its always best to open a demo account which can be easily found at any one of the binary options platforms out there, and also take a look at some of the binary options brokers reviews.
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