Options strategies

Options can be used in a long term investment plan

It can be used to generate income in the form of options premiums

Two examples of use

Covered CALL

You can use it if you think the stock price is going to drop, but you still want to maintain your stock position,

or if you think the stock will go up but below the strike of the CALL  contract

1- Own stock (100 shares for a total security)

2- Sell CALL contract (1 contract = 100 shares)

 

Selling PUT

You can use it if you think the stock price is going to go up or stay above the strike,

use this on stocks you want to buy anyway, maybe you ll have these for less in case the price drop at the strike or below

You have to take into account that the risk in this strategy is if the stock drop to zéro, you can lose (X contract x 100 x the strike)

 

Watch the VIX (Volatility Index) to know when sell CALL/PUT

For better return, sell it when volatility is high > 20 %

 

 

 

 

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