Covered option yield


    He was formerly a market maker for a Chicago options trading firm and lectures and coaches on options trading.

    Read more by him at cabotwealth. In fact, several high profile hedge fund managers have recently said they expect the Fed will CUT rates in or Because of this monetary policy, it remains difficult to create yield based on savings alone. But there is another way to create yield against your stock holdings: sell covered calls on dividend stocks.

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    For every shares of stock you own, you can sell one call. If you own shares of stock, for instance, you can sell five calls. A covered call is a VERY conservative strategy that requires no margin.

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    The best stocks to use this strategy on share the following characteristics: I had an opportunity to give a talk recently on covered option yield calls. At the time ED was trading at 79 so I have used that price in my analysis. In this example we bought ED at 79, and sold the January After the trade was executed, here is how you price the breakeven on this position: As you can see, by selling a call against a stock position, it actually drops your breakeven.

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    I refer to this scenario as the static return. And because the stock closed below the strike price of the call you sold, you keep your woodies cci binary options. You no longer own the stock.

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    Virtually every investor I know has stocks covered option yield their portfolio that they have been holding for too long, and are not profiting from. Once you become familiar with the strategy, you can execute more covered calls.

    By adding this strategy to your investing arsenal, you can create more yield for your portfolio every month.

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