Selling Covered Calls: A Born to Sell Review
Investing in the stock market can be overwhelming, especially for beginners. Movies like The Wolf of Wall Street glorify the broker’s lifestyle, while also showing the extreme risk and temptation involved with such a career.
However, most of us aren’t looking for get rich quick schemes or to take huge financial risks. We want to enhance our digital nomad lifestyle by adding an additional source of income.
That’s why it’s important to think about investing modestly, and selling covered calls can help you do just that.
And selling covered calls can be a little complicated, so it’s important to take advice from someone who knows what they are doing.
That’s why online software such as Born to Sell is so valuable — as it provides useful insights from an industry leader. The man behind Born to Sell is Mike Scanlin. With over 30 years of covered call experience, Mike decided to automate the process. To do so, he interviewed over 50 covered call experts and developed a tool for finding the best covered call options available.
What does it Mean to Sell a Covered Call?
Selling a covered call is like putting a renter in your investment property. Sure, if the market goes up you’ll benefit from your property – but adding a renter ensures that you make money regardless of the direction the market goes. Covered calls provide the same benefit.
Let me explain…
Selling or writing covered calls is a financial strategy designed to provide an additional source of income to stock owners. You do this by writing “call options” against stocks that you already own.
A typical contract you write will be for 100 shares. The buyer will then agree to pay you a set price to have the option to purchase your shares at a fixed price. Each contract includes an expiration date.
For example, if the price per share is $70, then the buyer may purchase the option to buy 100 shares from you at a strike through price of $75 per share. You receive a fee of $3 for each share included (100 shares X $3 = $300). If the contract expires without meeting the strikethrough price, then you retain your shares.
However, if the price of a share greatly exceed the strikethrough price, then the buyer will purchase your shares from you at $75 per share. This still leaves you with a profit of $5 per share, plus the $3 per share for the option – totalling $8 per share.
It is important to note that your trading platform will charge a few additional fees for this exchange.
Want a more in-depth training on how to sell covered calls? Check out this tutorial.
Is There Risk?
Of course. No matter what anyone says, there is always risk when it comes to the stock market. But there is less risk in selling covered calls compared to other strategies.
You have the option to buy and sell stocks from hundreds of different websites, but selling covered calls is much less volatile than constantly trying to buy low and sell high.
The risk that does come with selling covered calls can be minimized by taking advantage of software such as Born to Sell.
What is Born to Sell?
Born to Sell is an online software that finds the best covered call deals available at any given time. Because stock prices constantly fluctuate, the value of covered calls adjust as well.
Born to Sell evaluates stock spreads to show options that can provide an annualized return of anywhere from 10% to 200% or more. In short, this tool helps you find purchases that have the potential of substantially increasing your investment returns.
However, some of these options are valuable because the stock is overly risky. Which means that, even if you make 20% on a covered call, you may still lose money on the stock itself. Because of this, I highly recommend avoiding stocks that you aren’t interested in holding for the long-term.
Getting started with Born to Sell
Born to Sell is not a software designed to help you purchase stocks, like TradeKing or OptionsHouse are. Therefore, to use Born to Sell you must already have a stock trading account and funds available to invest.
Once you have an trading account, you’re ready to get started.
As you can see above, a subscription to Born to Sell isn’t free, but you can start with a 14-day free trial to review the software and determine if it’s a good investment for you.
Because of the relatively high price, the Born to Sell team suggests that you only consider using the tool if you have $20,000 or more to invest in stocks – as this is when the benefit of the software compensates for the cost.
Once you have signed up, all you need to do to access the software is log in. There is no download required.
How Born to Sell Works
While Born to Sell provides a plethora of educational resources on stock trading and covered calls, it’s real value comes from the search tool.
As you can see, it provides a lot of detail!
And while it might look intimidating, don’t let it scare you. Ultimately, the tool allows you to filter using a variety of criteria to find the best options available.
If you still feel intimidated while looking for the right investment, start with something easy. I simply filtered for ETFs that were ending this month. As you can see from the screen above, by selling a covered call for UNG, I could make a 3.1% return in a single month!
Find a way to average a 3% monthly return on your investment and $100 becomes $142.50 in a year! Not too shabby.
My Thoughts on Using Born to Sell to Generate Income
Born to Sell has the potential to increase the returns of your stock investments by revealing high-yield covered call opportunities. However, it still requires a bit of work to maximize your profits – albeit less than if you searched for covered call opportunities on your own.
What I like about this site is that it shows you a low risk way to earn money from anywhere. The software accomplishes this by helping you to identify valuable covered call opportunities in the market.
Born to Sell is especially helpful in three ways:
- It allows you to see what top portfolios are doing.
- It allows you to monitor stock and option portfolios, and play around with what-if scenarios.
- It allows you to screen and filter calls based on a variety of different criteria, including upcoming earnings, upcoming dividends, and moneyness.
Again, as long as you have at least $20,000 to allocate towards covered call investing, it will be worth paying the annual price for this valuable tool.
Covered calls are one of the safest investment strategies available even though they have traditionally been low-yield investments. With Born to Sell’s many features, you can improve the returns of your covered call investments while still minimizing risk.
If you’re a casual investor looking for a set-and-forget investment strategy, you’re better off using Betterment or Acorns. However, any serious investor can benefit tremendously from learning how to invest in covered calls.
If you have a decent amount invested, and like the idea of using covered calls, then I recommend taking advantage of Born to Sell’s free trial to see if it’s right for you.
Worst case scenario, the software isn’t your thing and you can simply cancel the subscription. Best case scenario, the software pays for itself during the free trial!
For the comments: What is your experience investing in covered calls? Is it worthwhile? Would you consider using a tool like Born to Sell to assist with your stock selection?