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Thursday, May 10, 2012

Protection for Covered Call

One of the risks of trading covered calls is that the stock can go down. A way to provide protection for this event is to go into the options market and purchase at the money puts. That way, if the stock falls a considerable amount, the gain in the put should at least offset the loss in the stock. This trade has three legs; purchasing shares (a negative), sell calls against the stock (a positive), and buy puts to protect from the stock declining (a negative).

There is a very good blog on this type of trading named Power Options. Click on the link below to check it out.

Seeking Alpha - Power Options

Sell The Call does not have a position in any of the above stocks.

** Disclaimer** - Sell The Call is simply posting information. This is not a recommendation to buy or sell any of the securities above. Do your due diligence before investing as there is risk to all investments. Be sure to Like ourFacebook page, and follow Sell The Call's Twitter and Stocktwits pages.  

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