Financial Advisors, Financial Planners And Investment Managers By KhmengWat.com Finding a suitable investment professional is not easy. The number of different titles alone is enough to make your head spin. But in a nutshell, there are basically three different types of Read more...

|
The Covered Call / Buy-write Strategy By KhmengWat.com
For better or worse, most investors purchase stocks with the intent of holding their shares for an extended period of time.
We do this mainly because the media and industry professionals have drilled into our heads, year after year, time after time, that it's best to buy and hold. The recent bull market phenomenon also fueled this mindset because the 'buy and hold' strategy worked extremely well - for a while.
Whether or the not the 'buy and hold' strategy is still the most efficient way of investing remains a topic for discussion. However, it is still the strategy that most investors are comfortable with and tend to follow.
The first strategy we will discuss is a hybrid of the buy and hold strategy, one that provides for better and more consistent returns a large majority of the time when compared to naked stock ownership alone.
When we buy a stock, there are three possible outcomes. As we discussed previously, two of these scenarios are generally negative and only one outcome is generally positive. If the stock goes up, that is good. If the stock goes down, that is bad. And if the stock stays still, that is also a bad outcome.
To briefly recap, not only do you have a loss in opportunity cost (the money invested in your stagnant stock could be making you money if somewhere else) but also, you have incurred commission
|
|
Become Six Sigma Certified - Sponsored Link Ad - Villanova Six Sigma Certification. 100% Online Program - Free Info. Mastek net rises 16% in net profit for the quarter ended December 30, 2008 even as the companys numbers were impacted by forex losses and slowdown in some customer accounts. The city-based company reported a net profit of Rs 31.3 crore as against Rs 27.1 crore reported in BRIEF-US FDA says completes review of Enhance study for Vytorin AFX News Limited For more information and to contact AFX: www.afxnews.com and www.afxpress.com Breaking Forex News Thomson Financial News | Thu, Jan 8 2009, 20:39 GMT Thomson Financial News | Thu, Jan 8 2009, 20:38 GMT Thomson Financial News | Thu, Jan 8 NY Fed says bought $10.2 billion in MBS Jan 5-7 AFX News Limited For more information and to contact AFX: www.afxnews.com and www.afxpress.com Breaking Forex News Thomson Financial News | Thu, Jan 8 2009, 20:39 GMT Thomson Financial News | Thu, Jan 8 2009, 20:38 GMT Thomson Financial News | Thu, Jan 8 Obama proposes facility to backstop muni market Financial News | Thu, Jan 8 2009, 20:15 GMT Latest Updated Reports Today's Signal - Daily Forex Signal by JCL Capital Thu, Jan 8 2009, 20:21 GMT One year Outlook for EUR/GBP - The year-end high at 0.9805 by Mizuho Corporate Bank Thu, Jan 8 British Pound Crosses: Short Term Weakness Expected complete therefore wave e is expected to begin and make its way towards 2.80. Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT Analysis (published BRIEF-U.S. govt charges 82-year-old with mail fraud linked to Ponzi scheme AFX News Limited For more information and to contact AFX: www.afxnews.com and www.afxpress.com Breaking Forex News Thomson Financial News | Thu, Jan 8 2009, 20:15 GMT Thomson Financial News | Thu, Jan 8 2009, 20:15 GMT Thomson Financial News | Thu, Jan 8 BoE Cuts Rate to 1.5%, Further Cuts Likely Non-Predictions for 2009, Part II Jan 08, 2009 The First (and Possibly Last) Euro Decade Jan 07, 2009 Forex: Why the Dollar Is Staying Strong Jan 07, 2009 The Banker: Not a Clue Jan 07, 2009 10 Things to Consider Before Investing in Forex Jan 07, 2009 Banks should be advised to keep forex derivatives in suspense account with a directive relaxing the prudential norms for off-balance sheet exposure of banks pertaining to losses from exotic forex derivative products, it was yet to be followed by various financial institutions. According to RBIs instructions, all foreign Yen Expecting Small Gains despite Global Economic Weakness 13:30 GMT, and will be today's leading publication that will affect the Yen's For more forex information, go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more BOE Lowers by 50bp Says Weak Pound Enough Stimulus basis as its yield will remain above 1% for the time being stoking further decline in For more forex commentary go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more Bank Of England Reduces The Official Rate By 50 Basis Points To 1.50% of the Exchequer Alistair Darling declared that neither the government nor the Treasury are supporting such a move. Forex Technical Reaction: The pound made an 70-pip spike at the time the report was released. Previously, the pound traded flat during the S&P Picks and Pans: Wal-Mart, Satyam, Intuitive Surgical, Wyeth, Citigroup 08 to $3.36 and fiscal year 2010's by $0.13 to $3.55, to reflect unfavorable forex and weakening warehouse club demand. We are cutting our target price by $3 to $58 on DCF and p-e analyses. -J. Agnese S&P REITERATES HOLD OPINION ON SHARES OF Research and Markets: Illustrative Report on Mattel, Inc. and the U.S. Doll and Stuffed Toy Manufacturing Industry - AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Geopolitical Tensions Strengthened the Yen low of 91.55 alongside with a resistance level at 91.96 and a support at For more forex information, go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more .bottom_space Italy PM-Alitalia would still consider Lufthansa offer Extract not available. FCStone Group, Inc. F1Q09 (Qtr End 11/30/08) Earnings Call Transcript of this increase coming from exchange trade and the other $400,000 of this increase comes from our Forex commissions. As I mentioned before a decline in exchange traded volume of 2 million contracts was offset by a $0.50 increase in our commission rate SYNNEX Corporation Sets Record and Meeting Dates for 2009 Annual Meeting of Stockholders Sponsor Results With AAA rated, GE Capital Corp. Not an offer of securities for sale. www.geinterestplus.comPractice Forex Trading in Real Market Conditions with a Free Trial. www. GFTforex.comBuy for $4No account or investment minimums. No inactivity Air Canada opens new escape routes with the latest addition to its family of Flight Pass products AP - AP decline as jitters about consumers revive - AP - AP - AP Sponsored Links Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Kiplinger Magazine Brosnan, Bullock, Butler, Combs and Efron Set as Presenters at Golden Globe Awards - AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Consult with a Forex Trading Strategies Aggressively buy Japanese Yen Against US Dollar, British Pound, Swiss Franc, and Australian Dollar Our forex trading strategies forecast that the Japanese Yen will strengthen against the US Dollar, British Pound, and Swiss franc. A wide range of systems have bought the Japanese currency in the U.S. Debt: How Is it Affecting the Dollar? Non-Predictions for 2009, Part II Jan 08, 2009 The First (and Possibly Last) Euro Decade Jan 07, 2009 Forex: Why the Dollar Is Staying Strong Jan 07, 2009 The Banker: Not a Clue Jan 07, 2009 10 Things to Consider Before Investing in Forex Jan 07, 2009 Andrew Farrant to Lead Marketing and Corporate Communications at Sequa Corporation Sponsor Results With AAA rated, GE Capital Corp. Not an offer of securities for sale. www.geinterestplus.comFree Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. www. GFTforex.comFree 3-bureau Credit Report includes Transunion, Linde North Americas Toledo Plant Receives Responsible Care Certification Group web site at Contact: Linde corporate communications Peter Gavigan, 908-771-1512 Source: Linde North America Sponsor Results Practice Forex Trading in Real Market Conditions with a Free Trial. www. GFTforex.comBuy for $4No account or investment TABLE-U.S. Dec ICSC retail sales down 1.7 pct vs year ago 8 2009, 16:21 GMTThomson Financial Thu, Jan 8 2009, 16:19 GMT, Related Content by GFT (Global Forex Trading) Thu, Jan 8 2009, 17:27 GMTDaily Forex - by ACM - Advanced Currency Markets Thu, Jan 8 2009, 10:54 GMTDaily Analysis - by Finotec Group Inc. Thu REFILE-Ukraine faces big gas bill rise even with oil drop president Jose De Gregorio said in Santiago by Erste Bank Mon, Oct 27 2008, 10:20 GMT Daily Forex Technical Report - Daily Forex Technical Report - Yen Intervention Talk Builds Up by Action Forex Company Limited Mon, Oct 27 2008, 07:06 GMT Emerging Tenacity Solutions, Inc. Wins 2009 SmartCEO/BDO Seidman Future 50 Award - AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Forex Trading Strategies Aggressively buy Japanese Yen Against US Dollar, British Pound, Swiss Franc, and Australian Dollar Our forex trading strategies forecast that the Japanese Yen will strengthen against the US Dollar, British Pound, and Swiss franc. A wide range of systems have bought the Japanese currency in the Old Republic International Announces Fourth Quarter and Full Year 2008 Conference Call AP Related Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Practice Forex Trading in Real Market Conditions with a Free Trial. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Kiplinger USD/JPY Technical Analysis 8 January 2009 at 6:32 GMT. Total today +184, yesterday +149, as shown at www.zifx.com/performance.php For more forex information, go to www.iForex.bg NEXT ARTICLE : GBP/USD Technical Analysis 8 January 2009 Click the button to vote for this article Loading status ... EUR/USD - Euro Dollar, American Session - 08/01/09 take a short position. Resistances 1,3750 - 1,3840 Supports 1,3540 - 1,3320 For more forex information, go to www.mataf.net NEXT ARTICLE : Daily Forex Analysis Click the button to vote for this article Loading status ... EMAIL PRINT TEXT SIZE : A A A
costs on both the way in and way out. So, in this case, only one of the three scenarios provides a positive return.
For the sake of description, we will identify the three potential scenarios as the “up” scenario, the “down” scenario and the “stagnant” scenario. By employing the covered call or
“buy-write” strategy, you can change the outcome of the scenario profile so you have two positive potential results instead of only one.
Employing the covered call or “buy-write,” we still have the “up” scenario as a positive result, but now the “stagnant” scenario will also produce a positive result since we collect a premium and the third scenario, the “down” scenario will not be as negative.
Thanks to the covered call strategy, now two of three scenarios end in a positive result and the third has a result that is less negative.
Let's take a closer look at the covered call strategy and its construction. There are two components of the covered call strategy, the stock component and the option component.
The stock component consists of a long stock position (you own stock). The option component consists of selling one call per every one-hundred shares of stock owned.
Remember, one option contract is worth one hundred shares of stock. So for example, 1000 shares of stock equals 10 call contracts or 200 shares equals 2 call contracts.
The chart below shows more examples of the proper construction of buy-writes.
Please take special note that the ratio of stock to calls must be exactly 100 shares to 1 option contract.
Number of Shares Owned Call Contracts to Sell
100 1
300 3
1700 17
9200 92
14500 145
267000 2670
The philosophy behind the covered call strategy is not complicated. It entails using a long stock position along with a short call option to create a positive stream of additional income, much in the same way a person would purchase a house and then lease it out to collect rent in order to pay for the mortgage.
Another analogy is that of the insurance company. An insurance company receives premiums month in and month out. Over a period of time, this constant stream of income easily builds to a point where it outweighs any pay out the insurance company may face, even for catastrophic events.
The constant and reoccurring collection of option premiums works better if done over longer periods of time (for example, one year.) That time frame allows the odds to play into your favor.
Now let's talk about the odds. There have been several studies done on the topic of premium buying versus premium selling. The goal of the studies was to determine whether it is better to buy options or sell options.
Recent studies have found that selling the premium was the correct trade 78% to 83% of the time. That is a very high percentage and is worth taking advantage of when a good opportunity presents itself.
The covered call strategy takes advantage of the fact that an option is a depreciating asset because its extrinsic value goes to zero at expiration. The process by which an option's extrinsic value dissipates is called time decay.
Article Directory: http://www.cambodiaitcity.com www.ddl2khmer.com |
|
|
|
|
|
|
Additional
Resources
Come To Know The Difference Between Shares & Mutual Funds By KhmengWat.com “shares” refers to a the ownership certificates of a particular company. This is a unit of account for various financial instruments including stocks, mutual funds and limited partnerships. A share Read more...
|
Additional
Resources
Eine Aktienstrategie Für Ihren Erfolg An Der Börse By KhmengWat.com So oft sich dieses Thema in Artikeln, Büchern oder Newslettern wiederholt - es ist wichtig: Einer guten Aktienstrategie zu folgen ist der entscheidende Schlüssel zu Ihrem Börsenerfolg.Doch was Read more...
|
Become Six Sigma Certified - Sponsored Link Ad - Villanova Six Sigma Certification. 100% Online Program - Free Info. Yen Expecting Small Gains despite Global Economic Weakness 13:30 GMT, and will be today's leading publication that will affect the Yen's For more forex information, go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more BOE Lowers by 50bp Says Weak Pound Enough Stimulus basis as its yield will remain above 1% for the time being stoking further decline in For more forex commentary go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more Bank Of England Reduces The Official Rate By 50 Basis Points To 1.50% of the Exchequer Alistair Darling declared that neither the government nor the Treasury are supporting such a move. Forex Technical Reaction: The pound made an 70-pip spike at the time the report was released. Previously, the pound traded flat during the S&P Picks and Pans: Wal-Mart, Satyam, Intuitive Surgical, Wyeth, Citigroup 08 to $3.36 and fiscal year 2010's by $0.13 to $3.55, to reflect unfavorable forex and weakening warehouse club demand. We are cutting our target price by $3 to $58 on DCF and p-e analyses. -J. Agnese S&P REITERATES HOLD OPINION ON SHARES OF Research and Markets: Illustrative Report on Mattel, Inc. and the U.S. Doll and Stuffed Toy Manufacturing Industry - AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Geopolitical Tensions Strengthened the Yen low of 91.55 alongside with a resistance level at 91.96 and a support at For more forex information, go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more .bottom_space Italy PM-Alitalia would still consider Lufthansa offer Extract not available. FCStone Group, Inc. F1Q09 (Qtr End 11/30/08) Earnings Call Transcript of this increase coming from exchange trade and the other $400,000 of this increase comes from our Forex commissions. As I mentioned before a decline in exchange traded volume of 2 million contracts was offset by a $0.50 increase in our commission rate SYNNEX Corporation Sets Record and Meeting Dates for 2009 Annual Meeting of Stockholders Sponsor Results With AAA rated, GE Capital Corp. Not an offer of securities for sale. www.geinterestplus.comPractice Forex Trading in Real Market Conditions with a Free Trial. www. GFTforex.comBuy for $4No account or investment minimums. No inactivity Air Canada opens new escape routes with the latest addition to its family of Flight Pass products AP - AP decline as jitters about consumers revive - AP - AP - AP Sponsored Links Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Kiplinger Magazine Brosnan, Bullock, Butler, Combs and Efron Set as Presenters at Golden Globe Awards - AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Consult with a Forex Trading Strategies Aggressively buy Japanese Yen Against US Dollar, British Pound, Swiss Franc, and Australian Dollar Our forex trading strategies forecast that the Japanese Yen will strengthen against the US Dollar, British Pound, and Swiss franc. A wide range of systems have bought the Japanese currency in the U.S. Debt: How Is it Affecting the Dollar? Non-Predictions for 2009, Part II Jan 08, 2009 The First (and Possibly Last) Euro Decade Jan 07, 2009 Forex: Why the Dollar Is Staying Strong Jan 07, 2009 The Banker: Not a Clue Jan 07, 2009 10 Things to Consider Before Investing in Forex Jan 07, 2009 Andrew Farrant to Lead Marketing and Corporate Communications at Sequa Corporation Sponsor Results With AAA rated, GE Capital Corp. Not an offer of securities for sale. www.geinterestplus.comFree Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. www. GFTforex.comFree 3-bureau Credit Report includes Transunion, Linde North Americas Toledo Plant Receives Responsible Care Certification Group web site at Contact: Linde corporate communications Peter Gavigan, 908-771-1512 Source: Linde North America Sponsor Results Practice Forex Trading in Real Market Conditions with a Free Trial. www. GFTforex.comBuy for $4No account or investment TABLE-U.S. Dec ICSC retail sales down 1.7 pct vs year ago 8 2009, 16:21 GMTThomson Financial Thu, Jan 8 2009, 16:19 GMT, Related Content by GFT (Global Forex Trading) Thu, Jan 8 2009, 17:27 GMTDaily Forex - by ACM - Advanced Currency Markets Thu, Jan 8 2009, 10:54 GMTDaily Analysis - by Finotec Group Inc. Thu REFILE-Ukraine faces big gas bill rise even with oil drop president Jose De Gregorio said in Santiago by Erste Bank Mon, Oct 27 2008, 10:20 GMT Daily Forex Technical Report - Daily Forex Technical Report - Yen Intervention Talk Builds Up by Action Forex Company Limited Mon, Oct 27 2008, 07:06 GMT Emerging Tenacity Solutions, Inc. Wins 2009 SmartCEO/BDO Seidman Future 50 Award - AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Forex Trading Strategies Aggressively buy Japanese Yen Against US Dollar, British Pound, Swiss Franc, and Australian Dollar Our forex trading strategies forecast that the Japanese Yen will strengthen against the US Dollar, British Pound, and Swiss franc. A wide range of systems have bought the Japanese currency in the Old Republic International Announces Fourth Quarter and Full Year 2008 Conference Call AP Related Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Practice Forex Trading in Real Market Conditions with a Free Trial. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine Kiplinger USD/JPY Technical Analysis 8 January 2009 at 6:32 GMT. Total today +184, yesterday +149, as shown at www.zifx.com/performance.php For more forex information, go to www.iForex.bg NEXT ARTICLE : GBP/USD Technical Analysis 8 January 2009 Click the button to vote for this article Loading status ... EUR/USD - Euro Dollar, American Session - 08/01/09 take a short position. Resistances 1,3750 - 1,3840 Supports 1,3540 - 1,3320 For more forex information, go to www.mataf.net NEXT ARTICLE : Daily Forex Analysis Click the button to vote for this article Loading status ... EMAIL PRINT TEXT SIZE : A A A GBP/USD - British Pound Dollar, American Session - 08/01/09 British Pound Dollar, merican Session - 08/01/09 - Forex IBT FX Center CSS for the demo. CSS needed for the scripts are loaded dynamically by the scripts messageObj new // We only create one object of this class // PFGBEST Announces Winners in BESTDirect Traders Challenge the company?s BESTDirect Traders Challenge that ran from August 4 through December 19, 2008. Competitors traded futures and/or forex markets on the BESTDirect 8.0 electronic trading platform. Mr. Steinberg recorded an overall trading profit of USD/CAD - US Dollar Canadian Dollar, American Session - 08/01/09 Dollar Canadian Dollar, merican Session - 08/01/09 - Forex IBT FX Center CSS for the demo. CSS needed for the scripts are loaded dynamically by the scripts messageObj new // We only create one object of this class // USD/CHF - Dollar Swiss Franc, American Session - 08/01/09 t take a position. Resistances 1,1090 - 1,1180 Supports 1,0940 - 1,0850 For more forex information, go to www.mataf.net NEXT ARTICLE : USD/JPY Technical Analysis 8 January 2009 Click the button to vote for this article Loading status ... EMAIL PRINT TEXT USD/JPY - Dollar Yen, American Session - 08/01/09 to take a position.. Resistances 92,00 - 92,50 Supports 91,50 - 91,00 For more forex information, go to www.mataf.net NEXT ARTICLE : USD/JPY Technical Analysis 8 January 2009 Click the button to vote for this article Loading status ... EMAIL PRINT TEXT GBP/JPY - British Pound Yen, American Session - 08/01/09 British Pound Yen, merican Session - 08/01/09 - Forex IBT FX Center CSS for the demo. CSS needed for the scripts are loaded dynamically by the scripts messageObj new // We only create one object of this class // EUR/JPY - Euro Yen, American Session - 08/01/09 4 Trend following): 2. Resistances 125,00 - 125,50 Supports 124,10 - 122,50 For more forex information, go to www.mataf.net NEXT ARTICLE : USD/JPY Technical Analysis 8 January 2009 Click the button to vote for this article Loading status ... EMAIL PRINT EUR/GBP - Euro British Pound, American Session - 08/01/09 4 Trend following): 3. Resistances 0,9000 - 0,9065 Supports 0,8850 - 0,8650 For more forex information, go to www.mataf.net NEXT ARTICLE : USD/JPY Technical Analysis 8 January 2009 Click the button to vote for this article Loading status ... EMAIL PRINT
|