Using a variety of option strategies has multiple advantages dependant on their execution and application. Some of these strategies include;
- Stock-Covered Sold Call Options - Adding no further downside risk to your position, the covered call option offers an opportunity to earn an income on your holding by selling to the market the option to purchase your shares at an agreed price by an agreed time. If this option is not exercised, your position is retained and the premium paid by the market to have that option is kept as an added income in your portfolio. If the option is exercised, you have the obligation to sell the shares at the agreed price. Advisers will typically only sell call options over positions if a capital gain has already been achieved since entry.
- Cash-Covered Sold Put Options - This strategy offers an opportunity garner an income from cash holdings. A put option is sold with a strike price at the lower end of a shares’ trading range. If exercised, you are obligated to purchase the shares at the agreed price and retain the option premium. Put options will typically be sold only over Companies viewed to be good additions to your portfolio at prices low in their trading range. If you are not exercised, you are not obligated to purchase the shares so the option premium is retained as an income made on cash held.
CharterMarkets are constantly monitoring market movements for opportunities both over existing holdings (covered call option) and potential holdings trading at perceived undervalued levels (put options).
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