SMB CAPITAL OPTIONS TRAINING PROGRAM . SESSION THIRTEEN . COVERED CALLS . COVERED CALLS. COVERED CALLS ARE USED TO ENHANCE INCOME ON PORTFOLIOS OF EQUITIES THAT THE TRADERS CONSIDER A BUY.
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COVERED CALLS ARE USED TO ENHANCE INCOME ON PORTFOLIOS OF EQUITIES THAT THE TRADERS CONSIDER A BUY.
PROGRAMS OF COVERED CALLS ARE NORMALLY UNDERTAKEN ON LARGE CAP, MATURE STOCKS THAT , HAVE PLENTY OF OPTIONS LIQUIDITY.
PROGRAMS CAN ALSO BE UNDERTAKEN WITH ETFs IF TRADERS ARE BULLISH ON THE STOCKS WITHIN THE SPHERE OF THAT ETF.
COVERED CALLS CAN ALSO BE DONE “SYNTHETICALLY” FOR SMALLER CAPITAL LEVELS USING DEEP IN THE MONEY CALLS MANY MONTHS OUT IN WHICH CASES INDICES CAN ALSO BE TRADED (YOU CAN’T BUY 100 SHARE OF AN INDEX, BUT YOU CAN BUY A DEEP IN-THE-MONEY CALL OF AN INDEX).
Buy back the original short call for a profit of 80% of its original value and sell a lower call, at the next highest strike above the highest time premium call strike.
Repeat the process multiple times within the expiration cycle if necessary, until 15 days before expiration in which case the call should be rolled to the second highest time premium strike in the next month.
Utilizing Optionvue’sbacktrader module, select any large cap stock in any January over the last five years that could have reasonably been considered at the time to be a “buy” (even if it later proved to be a loser). Undertake a covered call program for that stock as laid out in this session. Set up an account in Optionvue for that trade and compare the final twelve month results to simply owning the shares outright.
Do the same for two other stocks, starting in two different years.