Time To Write Covered Call Options On BHP Billiton?

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Blue chip stocks in the natural resources sector, like BP (NYSE: BP) and Rio Tinto (NYSE: RIO), are ideal for writing covered call options.

That's when the owner of the stock sells options, but not the obligation, to buy it at a higher price in the future. In the natural resources sector, BHP Billiton (NYSE: BHP) is a solid choice for writing covered call options for a variety of factors.

There are many ways to profit from writing covered call options, but there are three primary methods:

The first is through the actual sale of the option. That is cash in the bank (or an addition to the left side of the brokerage account).

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Next is from the collection of dividends during the period of the option. As BHP Billiton has a dividend yield of more than 3.5 percent, that is a nice check to get in the mail every three months (or added to the left side of the brokerage account).

The last is from the higher price of the stock if the option is exercised.

Options expert Dr. Joseph Louro, head of Investview (OTC: INVU), an investor education and financial technology entity, says that more than 70 percent of options are never exercised. And that makes selling covered call options on a company like BHP Billiton even more rewarding and even less risky.

BHP Billiton is up more than 10 percent for the last year of market action. However, it has been basically flat for 2014. BHP Billiton is also down for the last week and month of market action. Those are very appealing conditions for selling covered call options.

Posted-In: covered call covered call options Joseph Louro metals and mining mining natural resourcesEducation Long Ideas Dividends Options Markets Trading Ideas General Best of Benzinga

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