Covered Call

Option strategies to know

Covered Call: Investors will use this strategy when they have a short-term position and neutral opinion on assets or looking to generate additional profit or protect against a decline in underlying assets. Married Put: This option strategy is used like an insurance policy to save against uncertain price decline of assets. Bull Call Spread: This type of strategy is used when an investor is bullish but expects a moderate rise in price. Read More about Option strategies.
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Option Strategy: Protective Call/Synthetic Long Put

If investors are of the view that market will go down or bearish but want to protect against an unexpected rise in the price of the stock. Suppose XYZ Ltd is trading at Rs 4457 in January. An investor Mr. A buys a Rs 4500 Call Option for Rs 100 while shorting the stock at Rs 4457. The Net credit of investor is Rs 4357 (Rs 4457- Rs 100). Strategy: Short Stock + Buy Call Option Risk is Limited  Maximum Risk(Rs 143) = Call strike Price (Rs 4500)- Stock Price (4457) +100. Rewards= Maximum is stock price-call Premium. Other Option Strategies Long Combo: Sell a Put, Buy a Call Covered C...
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Option Strategy: Covered Call

In covered call strategy call option is sold against already own stocks. Professional investors write covered calls to increase their investment income. For example, assume that on 01, January a trader Mr A owns 100 shares of XYZ company. XYZ currently trading at Rs 100 but Mr. A pretty sure it will stay below Rs 105. To generate a little bit of extra income, he sells Mr. B a call option with February expiration date and a strike price of Rs 105. The Call option is priced at Rs 3 per share and it controls 100 shares. By selling the call option, Mr. A receives a Rs 300 premium today in exch...
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