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A covered call involves selling a call option on a stock that you already own. By owning the stock, you’re “covered” (i.e. protected) if the stock rises and the call option expires in the money.
Payoffs from a short put position, equivalent to that of a covered call Payoffs from a short call position, equivalent to that of a covered put. A covered option is a financial transaction in which the holder of securities sells (or "writes") a type of financial options contract known as a "call" or a "put" against stock that they own or are shorting.
With the same initial investment of $200, a trader could buy 10 shares of stock or one call. If the stock finishes at $24, then… The stock investor makes a profit of $40, or (10 shares * $4 gain).
A covered call position is a neutral-to-bullish investment strategy and consists of purchasing a stock and selling a call option against the stock. Two useful return calculations for covered calls are the %If Unchanged Return and the %If Assigned Return. The %If Unchanged Return calculation determines the potential return assuming a covered ...
A naked option involving a "call" is called a "naked call" or "uncovered call", while one involving a "put" is a "naked put" or "uncovered put". [1] The naked option is one of riskiest options strategies, and therefore most brokers restrict them to only those traders that have the highest options level approval and have a margin account. Naked ...
You can buy a call on the stock with a $20 strike price for $2, and the option expires in six months. One long call contract costs $200, or $2 * 1 contract * 100 shares. Here’s the trader’s ...
A trader who expects a stock's price to increase can buy a call option to purchase the stock at a fixed price (strike price) at a later date, rather than purchase the stock outright. The cash outlay on the option is the premium. The trader would have no obligation to buy the stock, but only has the right to do so on or before the expiration date.
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related to: buy to close covered call