How to be masters of spreads.

What is covered call?

The covered call is a method that allows an owner of a stock to get paid for taking on the obligation of selling their shares at a certain price in the future.

Covered call is opposition weather trader has sold a call option against shares of an underlying stock they are currently long.. if a trader owns 100 shares of ABC they may sell one call option against the hundred shares of ABC this short call is covered by the long position in the underlying stocks this is called covid call.

Many option strategy are are known covered call.. it is possible to buy stock and sale of call option simulate universally in one transaction.A trader owns 100 shares of ABC stocks is trading at 76 .75 he is combining placing and order to sell his seat iti but also text look at call of santu das site if selling calls might be a viber alternative. In this case January options are 30 days to expirations and the January 80 call is bid at 1.05. he decides to take in 1.05 by selling one of the January 80 call of sons and take on the obligation to sell his 100 shares at 80. By selling the call option he is just being a paid to take on an obligation to do something he was planning on doing in the first place.

The break even point is calculated by taking the current price of the underlying stock and subtracting the premium received for selling the call of Sins in this case the break even point is 75 .70 aur 76.75 stock price minus premium received 1.05.

The maximum loss would be included on this trade if the stock was to go to 0 with ABC at 0. The total loss on this trade would be the same as the break even point or or 75.70.The 1.05 premium received would be e nice but not much of a buffer if the stock word to go to 0. Finally the potential maximum profit of the state should be calculated. In the case of covered call the maximum profit is at the cal strike at 80. At any level above 80 gastric ful be called away at expiration and the account will receive 80per share. Binding this with the 1.05 received for selling the option gives the account 80 1.05 in cash best acting 76.7 5 would be a profit of this 4.30 is the maximum potential profit from having written up call on ABC.