There are two fundamental reasons why we trade options: leverage and protection. (See also: Top 7 Reasons to Trade Options.) We want the big gains that options trading can provide, and we also use options trading strategies to preserve those hard-earned portfolio profits.

Even though we’re all searching for those double- and triple-digit wins that options trading can provide (i.e., leverage), in a wild market like this where our profits can practically evaporate within the space of a few days or even a few hours, I want to focus a profit-protecting topic that many of you may already be familiar with: selling covered calls.

I know that talking about conservative strategies might cause some of you to turn away. But for those of you still with me, I can change your life even if you are very familiar with the strategy, because I can guarantee that you are probably under-utilizing this powerful trading tool.

Think about this for a second: If you can generate 2.5% on your investment by selling a covered call each month, that’s a 30% annual return. And that’s only when you calculate the income you’d get from selling covered calls — assuming you don’t make any money on the underlying stock position. But you have to consider that you might profit from your stock positio the trust is $40, and $50 longer term. 

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