 Hey guys, this is Hydra from Xtraits and in this video, I'm going to be going over covered calls and what they are and how you guys can use them to boost your returns for your investment portfolio. So covered calls is basically when you sell a call and, alright, so let's say you have a stock XYZ, alright, let's just say, let's use a real example, let's say you have a Tesla, right, or actually let's just use a hypothetical example, XYZ, alright, and it's trading at $100 currently, right, and let's say that you want to sell a covered call at $105, so you sell a call option with a strike $105 and let's say you get, it costs $0.80, right, so you get $80 of premium, right, and let's say you are going one month out, so let's say it's January right now and you're selling this for February, alright, so what this is basically doing is that you currently have, and to sell a covered call, first of all, you need 100 shares, so that's very important, you need 100 shares and that's equivalent to one call, one call. So if you have 1000 shares, then you can do 10 calls, alright, so those are the fundamentals, so let's say XYZ is currently trading at $100 and you want to sell a covered call for February and it has a strike price of $105 and let's say you get $80 of premium for it, right, so that means that as long as XYZ, so there's 3 outcomes that can happen, so XYZ closes below $105, right, let's say XYZ stays flat, then you keep that $80 of premium because it expired below that $105 price, right, stays flat or closes below $105, then you get to keep $80 and this $80 you basically just got for free for selling this covered call, right, if you didn't sell covered calls then you wouldn't be able to get this extra $80 a month, right, so that's the whole benefit of being covered calls, so let's say XYZ does close above, that strike price closes above $105, what happens now, right, so now you sell your shares at $105, so that's a $500 profit because you have 100 shares and that's a $5 move, so that's a $500 profit and you still get to keep that $80 from that option, right, so now you're starting to see how like why covered calls should sell great, right, so if it stays flat or closes below $105 you get to keep that $80 and if it closes above that $105 level then you get to sell your shares for a nice profit and you get to keep that $80 as well, so this way you're basically creating passive income, so typically you want to sell a call 30 days away from expiration, so if it's January 1st then I want to sell for February 1st, right, and so on, so you want to sell 30 days away from your current date and you typically want to sell 5% above the current price and you want to just rinse and repeat, right, and this strategy tends to work best for those stocks that tend to move slower, so like big cap stocks and non-tech stocks, it tends to work really well for those types of stocks and it also really works for dividend stocks, right, because dividend stocks usually move pretty slow and you can, this is a way to generate extra income for those dividend stocks, so let's say you're yeah buying like Coca-Cola and you get some dividends off it but Coca-Cola barely moves, right, basically stays flat most of the time, so you could sell these covered calls as a way to make extra income from those shares that you're holding, but yeah this is how covered calls work and there's really no downside to having covered calls except that when it closes above your strike price, let's say it goes to like, let's say you end up selling at 105 but the stock actually goes up to like 110, right, then you end up selling a lot earlier than you would have wanted to but you can also decide your strike price, right, so if you want to sell at 110 then you can make it 110 but the downside would be that you would collect the life premium, so if you did 110 then you would only collect like 40 dollars for premium instead, right, so it's very customizable and you can set it up to how you want it, so if you want your shares, if you want to give your stock more room then you can sell out further, collect less premium, but if you want to collect more premium then you would have to sell closer to the current price of the stock, I hope that makes sense, thank you guys for tuning in and feel free to DM me if you guys have any questions, thank you, bye. There's a reason why Xtrades is currently the fastest growing application on the market for sharing financial ideas, with over 2.5 million dollars paid in the last two years to contributors users are flocking to see what trades the top traders on the leaderboard are sharing in real time, if you're looking to grow your reputation as a trader on the internet or discuss your trading ideas with other reputable investors, click the link below and get connected with the trading mentor today completely free of charge.