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covered call strategy

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optionstrategies
covered call strategy

covered call strategy

 

 

The covered call strategy involves the trader  against stock they’re purchasing or already hold. Besides earning a premium for the sale, with covered calls, the holder also gets access to the benefits of owning the underlying asset all the way up to the strike price, chart patterns where the stock would get called away.

There are many different uses of the covered call strategy. Some use the strategy to make additional profits to the stock they hold while markets trade relatively flat. double top pattern This is popular option strategy among traders, because, besides the premium, investors can benefit from capital gains should the underlying asset increase in value. Out of the money (OTM) call trades are placed when the outlook is neutral to bullish.

When to Use the Covered Call

The covered call strategy is usually opened with 30 to 60 days before expiration. This allows a trader to benefit from time decay. Of course, the optimum time for implementing the strategy depends on the investors goals. what is implied volatility If the goal is to sell calls and make money on the stock, then it’s best if there isn’t a lot of difference between the stock price and the strike price. If the goal is to sell the stock and the call, then you should be in a position where the calls will be assigned. For this to happen, the stock price will need to stay above the strike price until expiration.

 

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