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A covered call is an options trading strategy that offers limited return for limited risk. A covered call involves selling a call option on a stock that you already own. By owning the stock, you ...
One covered option is sold for every hundred shares the seller wishes to cover. [1] [2] A covered option constructed with a call is called a "covered call", while one constructed with a put is a "covered put". [1] [2] This strategy is generally considered conservative because the seller of a covered option reduces both their risk and their ...
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.
Call options vs. put options The other major kind of option is called a put option, and its value increases as the stock price goes down. So traders can wager on a stock’s decline by buying put ...
These strategies may provide downside protection as well. Writing out-of-the-money covered calls is a good example of such a strategy. The purchaser of the covered call is paying a premium for the option to purchase, at the strike price (rather than the market price), the assets you already own.
Call option: A call option gives its buyer the right, but not the obligation, to buy a stock at the strike price prior to the expiration date.
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