Selling covered calls can be a good strategy as long as you select a strike price at which you would be willing to allow your holding stock to be called away. The covered call will help generate income during the holding period and lowers the original position’s cost basis.
A covered call consists of selling a call against shares of holding stock. Typically, covered calls are sold out-of-the-money above the current price of the underlying asset.
However, covered calls do not eliminate downside risk if the asset drops in price, but every covered call sold add credit to the account, thereby reducing the overall cost of holding stock position.
| Side | Price | Filled | Realized P&L |
|---|---|---|
| Sell Open | 2.30 1Lot(s) | +29.57% Holding |
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- fizzzi·01:42Key is picking a strike you are actually fine losing the shares at. On a setup like this, around 0.3 delta usually balances premium and upside better.LikeReport