Investors can enhance the yield of a concentrated stock position while decreasing its volatility by writing covered calls against some or all of the shares. Investors typically sell call options with a strike price that is above the current price of the stock and in return receive premium income. The amount of premium received will … Read more
Covered Calls A covered call is a very common option strategy used by both individual and institutional investors. At option expiration, the value of the covered call position is the stock price minus the exercise value of the call. Any appreciation beyond the exercise price belongs to the option buyer, so the covered call writer does not … Read more
By taking on a long position in a stock and combining it with a short call we create a covered call option. This allows to earn income from the short call, caps the upside from gains on the stock itself. Covered calls can be used to generate income (writing calls as long as price does … Read more
A goal of derivative strategies is to modify portfolio risk and return. By combining a bond portfolio with a short interest swap for instance, will reduce the duration of the portfolio. Combining a portfolio with bond futures will increase duration. In asset terms, we can replicate a long position using a combination of an asset … Read more