Many individual investors are tired of the ridiculously low returns that they are currently receiving from their investments. While it is certainly true that most will not need their funds until retirement, they will need them someday. As such, these investors have begun searching for alternative investment strategies that will help them increase their overall investment income. One profitable investment technique that many savvy investors have started using is known as writing covered calls.

Most investors, if asked, would indicate that they have at least heard of options trading previously. Most will, unfortunately, start off by explaining just how risky all option trading systems are. Despite the fact that there are a few advanced option techniques that do increase your risk not all of them do. A few of the more basic covered call strategies are widely considered to be among the safest and most conservative investment strategies available to investors of all sizes. Furthermore, since the investor can earn money from their existing portfolio selling covered calls provides a profitable way to generate additional portfolio income.

When it comes to covered call strategies there are three basic forms. The first involves selling calls that are out-of-the-money. What this essentially means is that the price of the underlying stock is below the option’s strike price. Selling out-of-the-money calls allows an investor to profit fractionally as the stock increases in value.

Another profitable strategy is to sell in-the-money calls. In this scenario, the price of the underlying stock above the current strike price. Investors sell in-the-money calls primarily for the premium income that it generates and try to select strikes in which they will get called out of their stock. This strategy is a short-term play that can be extremely profitable when executed properly.

The final type of covered call strategy is based around using LEAPs (long-term equity anticipated securities. In essence, LEAPS are options that have a much longer period of time between the trade date and the expiration date. Most savvy investors use LEAPS as a way to fund their transactions since it is much less capital intensive. To execute this strategy an investor would buy a LEAP and then sell a call for the same security that has a much shorter expiration date. Since you will still retain control over a certain amount of the underlying stock you would still be considered covered and your potential liability would be somewhat limited.

If you are looking for an alternative investment strategy that can simultaneously put cash in your pocket and reduce a portion of your downside risk consider one of these covered call strategies.