Options for Volatile Markets: Managing Volatility and Protecting Against Catastrophic Risk, Second Edition

CHAPTER 5

Advanced Call-Writing Techniques

This chapter turns to more sophisticated implementations of call writing, including the use of margin, employing underlying securities other than stocks, and partial or ratio writing.

Flexibility is unquestionably one of the hallmarks of covered call writing. If you own stock and are not writing options, things are black or white—you either hold your shares or you sell them. Covered call writing expands your follow-up possibilities to include a number of ways to hedge the stock, in terms of both the amount and the time period. It also enables you to adjust the risk/reward parameters of your positions, should either the stock price or the market conditions warrant it. This flexibility expands dramatically ...