| Wolf Eye Options |
Premium is payment for risk |
| A covered call, line by line. |
| Hi ~Contact.FirstName~, |
| Here is a covered call on a hypothetical stock, ticker XYZ. These are teaching numbers, not market data and not a forecast. |
- You own 100 shares with a cost basis of $50.00
- You sell a call with a $52.50 strike, about 38 days out, for a $0.90 bid
- Break-even is $49.10 per share, your cost basis minus the premium
- If the shares are called away: ($52.50 - $50.00) x 100 = $250, plus $90 premium, minus $1.30 in fees = $338.70
- If the stock falls to $45.00 and you keep the shares: ($45.00 - $50.00) x 100 + $88.70 = -$411.30
|
| Look at the last line. The premium cushions a fall a little. It does not stop one. And the first outcome shows the other side of the deal: above $52.50, you stop participating. |
| That is the idea the whole approach rests on. Premium is payment for taking on an obligation and giving up upside. A bigger premium usually means the market sees a bigger risk, not a bigger gift. |
| The Your First Covered Call class walks through this arithmetic, then has you do it with your own numbers on a one-page trade-plan sheet, with a written plan for each outcome. |
$29
one payment, not a subscription |
|
|
| Wolf Eye Options |
| P.S. If you already know covered calls well, the Playbook (next email) goes further: cash-secured puts, choosing stocks, rolling, and stop rules. |
| Questions? Reply to this email, write trading@protraderstrategies.com, or call (310) 598-6677. |
|
Wolf Eye Options · Educational use only
Educational use only. Not investment advice, not a recommendation, and not an order to buy or sell any security. Options involve risk and are not suitable for every investor; you can lose money, including the full value of shares you own. All trade examples are hypothetical teaching numbers or past data labeled as such, and are not forecasts. Wolf Eye Options is an education publication and does not provide personalized advice. Read Characteristics and Risks of Standardized Options, published by the Options Clearing Corporation, before trading options.
You are receiving this because you signed up with Wolf Eye Options (Pro Trader Strategies). Unsubscribe
Wolf Eye Options (Pro Trader Strategies), 1611 S Catalina Ave Suite #209, Redondo Beach, CA 90277
|
|