How to Buy Shares using Covered Calls

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How to buy shares using Covered Calls.

Are you looking for Cashflow from shares?

how to buy shares using covered calls
How to buy shares? It’s an interesting question….where do i begin.

I have had an active interest in the sharemarket for over 10 years, but as you’re all aware, the market can go up, down and often sideways.

After  many attempts at trying to pick winners and “manage my money” and utilise my skills at “technical analysis” I decided that perhaps a better long term strategy would be to invest for an income stream. This is where the covered calls strategy comes into play.

I first heard of this strategy back in 1999  and gave it a go, trying to milk the reasonably volatile NewsCorp stock on the ASX, all to no avail. I didn’t have the skills and hadn’t done the homework to make it work at that time. What I was missing was a mentor who had done it all before and knew how to make it work.

Enter George Fokas of Fokas Beyond, who has been actively using the sharemarket to generate income for the past 11 years. I have recently joined George’s mentoring program with the aim of generating a passive income from my capital, whilst minimizing any risk. I’ll be using these blog posts to provide an update on my progress (or lack thereof)…

I you want to see whether the strategy is working for me just come back to these posts and check my results which I’ll publish on a monthly basis, along with a commentary on what I’m learning and how the market is looking.

Until next time

how to buy shares using covered calls

Dwight Veenman

 

 


45 Comments

  • So how is it all going for you? Are you making money?

  • So here I am but there have been no posts each month as you indicated….Does that mean you didn’t go ahead with it, or that it didn’t work out?

  • Sorry to be so slow to respond. I’ve been running my share trading account with some seed funds and breaking even. I will update with proper results in the near future

  • Hi,

    I’m attending a seminar of George Fokas in approx. 2 weeks time, I’d also be very interested to hear how you are going with this!

  • Hi Emma,

    The strategy definately works if you’re looking for a high yield and a regular income.
    You do have to change your mindset from the buy/hold/sell model. I have 2 shares that are below initial purchase price but are still generating the same cashflow. Do I sell? It all depends on how much income and how much below purchase price. You just have to get your head around this. I’m currently workling up a spreadsheet to help me analyse things a bit quicker. I will be posting this up on the website when it’s done.

  • I’m also interested in the results you have achieved. I saw him earlier this year but didn’t buy his program. How much did you need to outlay to start? And is it really as quick/easy as he says?

  • Hi Jan,

    I personally started with a bank of about $20k. I took a dip initially but have been making income for the past 2 months. I’ve been a bit quiet because I don’t want to pump up an idea that I haven’t been able to get good results from myself first. Now that I’m getting consistent returns and better understand how to manage my positions I’ll be putting up some articles and posts.

    You can start with $5k and be able to trade, but as the return is slow and steady you’ll find you’d probably be better off with at least $10-20k as a minimum to make the returns more than the brokerage and other costs. But that’s just my opinion, there is no hard and fast rule.

  • Hello. Which stocks do you write covered calls against?

  • Hi. I was trying to make a spread sheet that would calculate the compound income.
    I wasn’t sure what sort of income or capital gain tax applies if you just keep on reinvesting your gains. Would you have to pay tax at any point if the shares don’t go in value as such but you just keep on buying more with whatever you made. Super confused.

  • what rate of interest are you making???

    3-5%???

  • Hello Lee,

    Anything in top 200 but not pharmaceutical.

    Dwight

  • No, I’m not. Right now I’m treading water and unless I can make it work with a reasonable return I’m not going to encourage it as an “anyone can do this” kind of strategy.

  • Great question Ally. I’m not an accountant. I don’t know either. You make money, you pay tax, etc etc.

  • Hi Ally and Dwight, If you make “income” of any sort, you need to keep track of it and declare it with your income each financial year.

    There are 2 different types of income that would be most relevant to you.
    Dividends received are included at a specific question in your income tax return. It doesn’t matter what you do with the income, that is not what counts.

    When you buy and sell shares, which are classified as assets, you will either make a capital gain or a loss. This gain or loss must be declared in a different part of your tax return.

    You can find out what you need to know about dividend income and capital gains and losses by logging on to the Australian Tax office website and searching those topics, or you could phone the tax office, and they will talk you through where to access their publications that deal with all this. The publications have examples and case studies.

    You also need to keep records of your expenses in gaining this income, because some will be deductible against any income.
    Margaret

  • Thanks for sharing your on-going experience on George Fokas’ course. I am interested to follow you’re going with the strategy.

  • Thanks Ada,

    To be fair, I’m just plodding along with this and not currently making money. It’s a valid idea but I’m not going to post any more about it unless I can get it to show a decent profit over time.

    Dwight

  • Hi Dwight,

    Just wondering if you subscribed to “Fokas picks” and if you found it helpful with your stock picking and decisions.

  • Hi Kali,

    I’ve used Fokas Picks in the past and it was a great help. I’m now flying solo and just trying to put the basic principals for stock selection in place. Time will tell whether I’m successful.

  • Hi Dwight, are you trading the US or Australian market with this strategy. I was a Sharelord client but not very successful on a 5k bank about 3 years ago. I’m thinking of getting back in but not sure whether to trade ASX or US market. Any comments will be appreciated.

    K

  • Hi Kay,

    I’m doing this in the US. I have a bank of about $20k and allow for 2-3 positions at a time. The US market has the advantage of the 100 share contract size and a top 100-200 stocks that are liquid for options trading. The only downside of the US market is the occasional large spread between contract positions. eg 20.00 then 22.50 for the next position. This is not for every stock but it means it vcan be difficult to roll your positions at times.

    Cheers and good luck.

  • Hi Dwight,

    How is going with your “experiment”? Are you making money?

    Cheers,
    V

  • Hi there!

    Dwight, how are you going with it all?

    I did the Fokas Beyond program and I was wondering if we might be able to share positions?

    Love to have a chat.

    Feel free to send me a msg if you’re keen.

    Cheers,

    Talia
    taliabrowne@gmail.com

  • Great that you are entering the success of the George Fokas courses. He sounds quite genuine. Do you know any good books that describe what he is doing? I am looking for recommended reading. As much as I would like to do the course – I do not have the funds to do it right now, but am very keen to learn the strategies that George teaches.

  • Hi Dwight,

    You mentioned that your trades overall are down in value. Can you tell how much they are down.?

    Also in hindsight would you have used insurance to prevent capital erosion?

    Thanks
    Vik

  • Google, Alan Ellman, Blue collar investor. I bought a few books, currently getting 3%pm on 50k. Remember, this is residual income. Passive income comes from zero ongoing work..

  • Hi , I would love to hear from someone that is not from their web page as they wouldn’t put up anyone with negative comments because that wouldn’t sell any of their products. Would like to know if someone of average intelligence ( me ) can actually make any money doing this covered call strategy . Regards Rick. would love a quick chat if at all possible. 0419 118 345
    From melbourne

  • Before doing any of these seminars, first question to ask these guys is do you actively trade? Then show me an original trading statement to prove the incomes that they earn? Otherwise, they are just used car salesmans with slick presentations praying on human emotion to suck you in to spending thousands of dollars on hindsight trading systems that anyone could teach. Easier to make money in the seminar circuit than trading itself! Don’t get sucked in!

  • Personally lost 30% with George over last 18 months. This strategy is not foolproof, but foolish!
    Once hes $igned you up, he dies not suport you when his stocks go er shaped! Beware!!

  • Personally lost 30% with George over last 18 months. This strategy is not foolproof, but foolish!

  • Hi Karen,

    How did you lose 30%? unless you sold your stock or forced to sell.
    I’m doing this strategy after signing up with him. I’m coming up to 4 months of live trading.
    1 thing I found is that I can’t put all my cash into the market.
    Got to leave some $ in case I need to buy my contract back.

    Also I found it’s not 60 minutes a month of work he claims.
    If you want to keep learning you need to more more in. I personally put 2-3 hours a week.

    It’s pretty time consuming to scan and pick your own stock too.
    I think he oversold the idea of little to no work to generate passive income using this strategy. I think people have unreal expectations going in. Even so, It’s still a great strategy. Definitely the time spent to look for stock is alot less compared to working as an employee and it beats trying to time the market/ trading.

    I love how I could hold a blue chip stock while getting an income. In the past I hold a blue chip stock with no money coming in. I have to bank on capital gain.

  • Hi Dwight,
    Are you still practising this strategy? It’s will be great to know how you go since you have more time in the market.

  • What trading platforms are you using?

  • Hi Ester , would love to know are you getting the 2-3 % per month income as they say in their seminars ? Sounds like you are putting in a fair effort to learn if you are spending 2-3 hours per week . Good on you if your doing well. Do you find the strategy easy enough to learn ? Also are you using the optionXpress platform and is it easy to navigate arround. Regards Rick

  • I received a total of net 8.3% for 5 months of trading. That’s 1.6% per month which is within their claim of 1-3% per month.
    It’s easy enough to follow but i think difficult master since the stock price can move against me. That’s why I gave 3.7% of my profit back to the market. I think with more experience I should be able to defend my profits better.

    Yes I’m using optionXpress. Their layout is easy to navigate.
    I tried 2 other online platform as the commissions are cheaper but the layout are stuck in 1980s, made it difficult to use.

  • Hi , I am sandy and new to this Option Platform, Could some one please share their experience or Suggest any material to through and understand the option. I am Currently trading forex but opton trading seems to be differenct experience. Regards Sandy. 0420896252

  • I was with George Fokas when he was with FFI Nike Hollick –he never showed what he was trading each day on the web to help you manage the reconditions that are given to you to trade ??
    I have found a good trader that shows each day and also emails two to three times a day with up dates on the trades to manage better as the market changes on the web page–this is more real to me and shows that you can loss and gain with your teacher and see more easer the forcers of the market take you .
    Check out Preston james –anyway the only problem is in Australia it is night ,so the email massages are very good to trade options on the US markets.

  • Hi, I use optionXpress to trade calls and puts and I have noticed a rise in fees particularly when selling to close. Would anyone know what platform you use with George Fokas?

  • Hi George , I believe the Fokas group use the same web site optionsXpress .

  • Hi Rick,
    I am pretty sure they use a new platform with lower fees just not sure which one. Anyway thanks for the prompt respond.

  • I was with George but did not renew when my year was up.
    Startegy does work but you can get the information online for free. Definitely does not worth $5k.
    He got new trading platform but not user friendly and think he gets a kickback from the commission.

  • Guys, i just attended one of his seminar, This method is synthetically same as selling a put. Covered call strategy has the same profit and loses as shorting a put. Not surprised that you have lost money there. there are better strategies out there (with less money) to generate income than covered call. read up on option trading if you want to learn more .

  • Can anyone answers his, when signing up to optionXpress did you have to provide your passport number as well as print off a form, sign it and send it to them? As well as provide copy of drivers license or passport?
    Thanks

  • Hi Roy,

    Yes I had to provide all the above mentioned particulars.

  • Hi Misha , can you point me in the right direction to look up about options trading you are talking about please.

  • Anyone know of any site that allows the writing of options over the stocks like George Fokas does ..? I know we can use his web site …?

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