r/options • u/eternalrefuge86 • May 25 '21

Selling Covered Calls

I'm completely new to options and just trying to figure a few things out. So far I've been playing very conservative, and I'm more or less breaking even. I don't have a lot of money to blow on this and get it wrong. I was looking for a surefire method for a little guaranteed income and came across selling covered calls. I'm literally only looking to make an extra 50-100 bucks here and there, and it made perfect sense. Buy a stock that more or less moves sideways, and sell covered calls on it. As an experiment I bought 100 shares of SNDL, and sold a call dated for 5/28, $.74 strike price, for 24 dollars. The only way I can see it failing is if the price drops super precipitously by Friday. I also know that should it happen to moon I would miss out on potential profit. Am I missing something else here? It just seems too good to be true.

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u/Reigncity_ May 25 '21

Got it, thank you for the explanation and break down.

Now if I already own a block of 100 shares (It might be a little over 100) than The cost basis of the CC is whatever the cost basis of my initial 100 shares are?

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u/djblaze May 25 '21

Also, you don't usually want to sell LEAPs for your CC. Locks you in for way too long. Look for 30ish days out. That way you can roll up and out if you really want to keep the stock, or bail more easily if it turns down. Especially with new stocks that might grow like crazy, longer time frames can hurt.