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Is Your Covered Call Strategy Actually Working?
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ticker lesson
Breakdown
0:00lesson
Covered calls as cost basis reduction
- Covered call reduces cost basis of long stock
- Not about income but position management
- Short call serves same function for different positions
2:15IBM· ticker
IBM — covered call example
- Buy 100 shares, sell 250 call
- Mid price 655 for 39-day call
- Time decay reduces call value to 460 in 2 weeks
4:51lesson
Rolling short calls strategy
- Buy back short call at lower price
- Roll to further expiration for new credit
- Use market data instead of theoretical models
7:04lesson
Risk management in covered calls
- Stock rally offsets short call risk
- Roll to lower strike if stock drops
- Strategy requires self-directed risk assessment
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