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Weekly vs. Monthly Covered Calls: Which One Should You Consider?

Letu2019s discuss weekly vs. monthly covered calls to know what type of option should an investor sell to generate the maximum return on his or her account.

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Weekly vs. Monthly Covered Calls: Which One Should You Consider?

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  1. Weekly or Monthly Covered Calls: Which is Better?

  2. Covered Calls The two most prominent types of covered call options expire on a weekly and monthly basis. This, of course, begs the question of what type of option should an investor sell to generate the maximum return on his or her account(s). Let’s take a few moments to discuss weekly vs. monthly covered calls and which one might be preferable for you.

  3. What Is an Option Expiration? When an option contract is entered into between a buyer and seller, it is not for an indefinite term. The contract will have a predetermined date set at the time of the sale transaction, by which the buyer of the option must decide whether or not to exercise their right to buy (or sell) shares of the underlying stock. This is the expiration date that we refer to.

  4. Which Expiration Date is Best? When discussing weekly vs. monthly covered calls, and what is the difference between weekly and monthly options, there are several different factors to consider. • Time Decay • Investment Objectives and Time Frame • Trading Frequency • Liquidity

  5. Time Decay Generally, the longer the time frame before expiration, the greater the option premium that will be received by covered call traders. Monthly options, taken individually, will therefore tend to generate more premium than weekly options, due to the fact that they have longer time horizons before they expire. For this reason, covered call traders rarely sell calls with expirations greater than 1 month.

  6. Investment Objectives and Time Frame Covered calls are best used as a short-term strategy to boost portfolio income. Depending on how short term that time will influence your decision between weekly vs monthly options. Other considerations include important dates influencing stock prices. When selling a covered call, you are obligated to sell your shares if the option buyer chooses to exercise the option.

  7. Trading Frequency Monthly covered calls have appealed to many investors due to the fact that they only need to be traded once per month. For investors that do not have a lot of time to devote to actively trading their accounts, this can be a big help. Other traders may be seeking out a more involved trading strategy. They would potentially be drawn to weekly covered calls, which offer far more trading opportunities throughout the year.

  8. Liquidity Liquidity in an investment portfolio not only refers to the ease with which the underlying portfolio can be converted to cash but also with which holdings in an account can be traded in a market. Prominent stocks trade both monthly and weekly covered calls, but there can be other variables that come into play as well. An investor will have to weigh these factors when determining what options to sell. A weekly option may appeal to the investor, but if the open interest or volume is low, it becomes very inefficient to trade.

  9. How Do We Best Trade Covered Calls? Regardless of whether or not you choose to trade monthly or weekly covered calls, one of the best ways to earn a consistent income is to devise a defined investment strategy and practice it without interruption. It is equally important to keep in mind that you want to stick with your investment strategy even when it is tempting not to.

  10. Contact Us Website: https://optiondash.com/ Email: support@optiondash.com Phone: 214-446-8540 Address: 100 Decker Ct. Suite 120, Irving, TX 75062, USA

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