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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.
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. The seller of a covered option receives compensation, or "premium", for this transaction, which can limit losses; however, the act of ...
TSX: ZWC – BMO Canada High Dividend Covered Call; TSX: ZWE – BMO Europe High Dividend Covered Call Hedged to CAD ETF; TSX: ZGD – BMO S&P/TSX Equal Weight Global Gold Index ETF; TSX: ZSP – BMO S&P 500 Index ETF; TSX: ZDY – BMO US Dividend ETF
One well-known strategy is the covered call, in which a trader buys a stock (or holds a previously purchased stock position), and sells a call. (This can be contrasted with a naked call. See also naked put.) If the stock price rises above the exercise price, the call will be exercised and the trader will get a fixed profit.
Combines protective puts with covered calls sold on same underlying stocks. Put protects downside while call premium offsets cost of buying put. Gains capped if shares called away.
Selling covered calls will generally limit the upside because investments that rise get called away. So the JP Morgan Nasdaq Equity Premium Income ETF's advance hasn't been nearly as large as that ...
The writing of the call option provides extra income for an investor who is willing to forego some upside potential. The BXM Index is designed to show the hypothetical performance of a strategy in which an investor buys a portfolio of the S&P 500 stocks, and also sells (or writes) covered call options on the S&P 500 Index.
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