Writing Coverage Call revenue is an attractive strategy because it can be profitable in a variety of different markets. Cover Calls – 3 Maximize Insurance Trade Call Revenue Adjustment
Like many options trading strategies, trading can be done more conservatively or more actively.
If you want to own 100 shares of a transferable stock and you sell other people's rights to buy your stock at a specific strike price from a specific exercise date. If the trading price of the stock at maturity is higher than the exercise price, the call option will be exercised and you will be asked to sell the stock at the agreed price
The most conservative method is to write the call to deposit, Below the strike price of the current share price. The cash premium you receive will include the amount of the option in the amount and an additional premium based on the time value (provided the exercise price is not too deep). You will receive less time premium (net income) with this approach, but the advantage is that you will get more downside protection because the stock will have to drop a lot and you lose money (it will have to trade the following
Writing a call in the currency or at an execution price very close to the current trading of the stock will give you more time to premium, but less protection. By choosing an exercise price that is higher than the current share price, you can give the least downside protection, but if the stock trades significantly more, it will produce the most profit
Realize that although the selected original strike price There are three such trade adjustments to maximize your guaranteed call revenue:
     
- This is a particularly good idea if the underlying stock goes up early if the stock moves early in the options cycle. For example, if the maximum return on the trade is 4%, but the stock has made a big advance in the early stages, making the deal up 3% in the first week, you should consider closing the position early. Not only do you lock your profits (as well as higher annualized earnings, but you also release your funds to other covered call opportunities
- Put down options if underlying stocks fall This may be a little tricky. If an overlay call transaction really begins to move you, it is better to close the position and reduce your losses. But if you choose a quality company, the stock has fallen, but not completely crashed, you can always call, repurchase the phone you originally sold (now worth quite a few) and then resell the other with a lower strike price . This will net you more revenue (which equates to additional downside protection), but it does come at a price – if the stock bounces, you are likely to lose a loss
- If stock trends go lower, close position early This is similar to the above example # 2, but better for stocks that are already low rather than stocks that have fallen sharply. It is also better used as part of a covered call strategy for investors using long-term portfolios who are not eager to sell their stocks. If the stock falls steadily, the original call option has lost a lot of value, and there is enough time before it expires, you may want to buy back, and then wait to see the stock the next stock. If the stock starts to bounce, you can resell the other call at the original strike price when the call increases again. However, if the stock continues to go lower, you can end up writing a new call at a lower strike price, a slow-motion scrolling of your original overlay call transaction
When caution is exercised overwriting telephone writing, this is a conservative strategy that can generate an attractive income stream. It is also a flexible strategy that can be modified to maximize revenue. But it is not without risk, it should not be without due diligence or aware of potential pitfalls.