Options  |  JAN 2000

Increasing Return With Covered Calls by Joe Demkovich and Eugene Theriot

Increasing Return With Covered Calls by Joe Demkovich and Eugene Theriot Worried about how exposed you are to price fluctuation in your options position? Don’t be. Here’s how you can retain flexibility by using covered-call options. One of the most conservative investing actions you can take is to sell covered-call options.Covered refers to your owning the stock underlying the calls you sell. Thus, if someone actually does ""call"" you, or take you up on your offer to sell the option,you can just sell them the stock. Of course, you do get paid for this, sometimes quite handsomely. There are three principal reasons to sell calls on stocks you already own: 1 You think the stock may not go up much in the near term and you want to increase your income. 2 You want to sell the stock at a price above the current value. 3 You want some downside protection against a drop in the stock price. In return, you must be willing to give up some of the potential upside movement in the stock.

by Joe Demkovich and Eugene Theriot