The Advantages of Buying or Selling Calls as an Investment Strategy

A call option is one way of guaranteeing an investor's stake in any of his or her ventures in any of the volatile markets such as stocks. Rates rise and fall all the time, and if one has the necessary calls, one can either buy or sell these and still rake in a considerable amount of money when stock prices soar. Buying calls mean that you purchase the rights to a commodity or stock, its premium.

However, ownership of call options may only be limited to the premium and not surrendering ownership of the physical or financial stock. This kind of arrangement is often called a naked call, you only own the selling rights and get to earn the premium or interest per each share. For call options that also entail ownership of the physical or financial stock, this arrangement is termed the covered call. A covered call means that an investors owns the stock on the table. One can earn the premium or the interest of this commodity, but without having to sell the physical or financial stock.

Advantages of buying and selling calls

Buying and selling calls can greatly improve one's finances and standing in the playing field. The benefits of selling calls include raking in profits without having to acquire or dispose of the physical or financial commodity. Though a price increase may threaten one's chances of maximizing a sell, returns can still be favorable. Selling call options on the other hand is also a profitable venture. As long as rates for the stocks are consistently above the selling price, not only will the seller earn from selling the stock, but also earn a profit from the premium.