Covered Call Strategies

B

bob2007

I was just thinking that since I am a swing trader....

Wouldn't it be a good strategy to do covered calls?

e.g.
I want to hold stock X. For two weeks. Price $100.
I will not sell it until the price is $120.
I can sell a call option 2 weeks Strike price $120.

Isn't this strategy better than just buying and holding the stock?
 
If price moves south you have a risk. There may also be dividend risks. It is an option used in long term buy and hold to collect rent.
 
stocks/ETF with dividends likely have less option premium.

an example only for reference & information purposes only.

lets take a wild card pick NCLH at $12.50 last. Buy the stock sell a DITM covered call at $5 strike price expiring Jan 2021, pays $8.80 last Friday 17 April

https://www.barchart.com/stocks/quotes/NCLH/options?moneyness=allRows&expiration=2021-01-15

$5 + $8.80 = $13.8 - $12.50 = $1.3/$12.50 = approx 10.4% with downside protection to ($5-$1.30) = $3.70

10.4% for 9 mth trade is ~13.86% annualized.

or what about a Jan 2021 expiry vertical call spread 5/10 cost $2.43 max loss. $5 spread - $2.43 cost = $2.57 potential profit on an investment of $2.43 = 105.7%
 
bob2007 said:
I was just thinking that since I am a swing trader....

Wouldn't it be a good strategy to do covered calls?

e.g.
I want to hold stock X. For two weeks. Price $100.
I will not sell it until the price is $120.
I can sell a call option 2 weeks Strike price $120.

Isn't this strategy better than just buying and holding the stock?
More...

if you buy a dividend stock & option ATM or ITM, your option is exercised before ex-dividend date ... no dividend
 
Last edited:
Why not sell a put if you are certain that it will move up? An option is more valueable the closer it is to the strike price
 
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