Selling Shares the “Usual Way” vs. Using a Covered Call Option
Needless to say, you can sell your shares the usual way—when they reach your target price. So simple and maybe that's why many wonder: why complicate things by selling through options?
Sometimes, I also wish the stock market were that straightforward. There's nothing wrong with selling shares outright; the challenge lies in the time it takes to reach your target price. If you buy a stock today and it rockets to your target price within minutes—PERFECT! But if it takes weeks, months, or even years, your shares are essentially just sitting there doing “nothing.”
That's where covered call options come in. By selling a covered call, you can generate passive income while waiting for your stock to reach its target. It's a win-win—and in some cases, the premiums you collect might even exceed the eventual capital gains from selling the stock.
I started with a small capital account, so I understand that it's not easy to acquire the 100 shares needed to start selling covered calls. But as Charlie Munger might say, “I don't care what you have to do! If it means walking everywhere, eating only what you bought with a coupon, or concentrating all your capital in one stock—find a way to get your hands on 100 shares of a quality company and start selling covered calls.”
For those who've never used options, I strongly recommend learning this skill. It can significantly improve your rate of return.
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