Systematic Covered Writing

'More than just Covered Calls'

Ways to Make Money in the Market

METHOD THREE

Systematic Covered Writing generates real usable cash.

Method Two presented two possible outcomes of a covered call position.

·        Either the option will be exercised at a specified price, on or before a specified date and the stock will be sold.

·        Or the option will expire worthless and the premium (cash) received from the sale of the call will be retained along with the stock.

Most of the information available from brokerage firms (or from online sources) that discuss selling covered calls stop right here.  In fact, a strong caution is usually presented to potential investors implying they will 'give up' possible upside potential in the price of the underlying stock if they choose to sell a call option against their stock.  This statement is basically true unless the investor employs method three.

To repeat, if and only if, a covered writer does nothing, one of the two possibilities described in Method Two will definitely take place. Method three is a collection of strategies available that lead a covered writer towards preventing either one of these possibilities from occurring.  Method three is the basis behind the Systematic Covered Writing process.  Simple math exercises are used in the decision making process under this style of investing.

  

SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised: 03/04/07