Compare Strategies
COVERED CALL | COVERED CALL | |
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About Strategy |
Covered Call Option StrategyMr. X owns Reliance Shares and expects the price to rise in the near future. Mr. X is entitled to receive dividends for the shares he hold in cash market. Covered Call Strategy involves selling of OTM Call Option of the same underlying asset. The OTM Call Option Strike Price will generally be the price, where Mr. X will look to get out o |
Covered Call Option StrategyMr. X owns Reliance Shares and expects the price to rise in the near future. Mr. X is entitled to receive dividends for the shares he hold in cash market. Covered Call Strategy involves selling of OTM Call Option of the same underlying asset. The OTM Call Option Strike Price will generally be the price, where Mr. X will look to get out o .. |
COVERED CALL Vs COVERED CALL - Details
COVERED CALL | COVERED CALL | |
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Market View | Bullish | Bullish |
Type (CE/PE) | CE (Call Option) | CE (Call Option) |
Number Of Positions | 2 | 2 |
Strategy Level | Advance | Advance |
Reward Profile | Limited | Limited |
Risk Profile | Unlimited | Unlimited |
Breakeven Point | Purchase Price of Underlying- Premium Received | Purchase Price of Underlying- Premium Received |
COVERED CALL Vs COVERED CALL - When & How to use ?
COVERED CALL | COVERED CALL | |
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Market View | Bullish | Bullish |
When to use? | An investor has a short term neutral view on the asset and for this reason holds the asset long and has a short position to generate income. | An investor has a short term neutral view on the asset and for this reason holds the asset long and has a short position to generate income. |
Action | (Buy Underlying) (Sell OTM Call Option) | (Buy Underlying) (Sell OTM Call Option) |
Breakeven Point | Purchase Price of Underlying- Premium Received | Purchase Price of Underlying- Premium Received |
COVERED CALL Vs COVERED CALL - Risk & Reward
COVERED CALL | COVERED CALL | |
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Maximum Profit Scenario | [Call Strike Price - Stock Price Paid] + Premium Received | [Call Strike Price - Stock Price Paid] + Premium Received |
Maximum Loss Scenario | Purchase Price of Underlying - Price of Underlying) + Premium Received | Purchase Price of Underlying - Price of Underlying) + Premium Received |
Risk | Unlimited | Unlimited |
Reward | Limited | Limited |
COVERED CALL Vs COVERED CALL - Strategy Pros & Cons
COVERED CALL | COVERED CALL | |
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Similar Strategies | Bull Call Spread | Bull Call Spread |
Disadvantage | • Unlimited risk, limited reward. • Inability to earn interest on the proceed used to buy the underlying stock. | • Unlimited risk, limited reward. • Inability to earn interest on the proceed used to buy the underlying stock. |
Advantages | • Profit from option premium, rise in the underlying stock and dividends on the stock. • Allows you to generate income from your holding. • Profit when underlying stock price rise, move sideways or marginal fall. | • Profit from option premium, rise in the underlying stock and dividends on the stock. • Allows you to generate income from your holding. • Profit when underlying stock price rise, move sideways or marginal fall. |