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Stocks & Commodities V. 43:10 (16–20): Understanding The Trade-Offs Of A Synthetic Covered Call by James Leahy
Stocks & Commodities V. 43:10 (16–20): Understanding The Trade-Offs Of A Synthetic Covered Call by James Leahy
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Understanding The Trade-Offs Of A Synthetic Covered Call by James Leahy
Using a synthetic covered call (also called a diagonal spread) requires the trader to make decisions about which strike price and time to expiration to choose. In this article, we explain some trade-offs to help you choose wisely. We’ll also show other methods of achieving a payoff and risk similar to those of a traditional covered call.
A traditional covered call is created by selling an out-of-the-money call option on stock that you already own. However, this requires a lot of capital to purchase the stock. There is a cheaper way to trade covered calls: you can use a synthetic option instead ...
Using a synthetic covered call (also called a diagonal spread) requires the trader to make decisions about which strike price and time to expiration to choose. In this article, we explain some trade-offs to help you choose wisely. We’ll also show other methods of achieving a payoff and risk similar to those of a traditional covered call.
A traditional covered call is created by selling an out-of-the-money call option on stock that you already own. However, this requires a lot of capital to purchase the stock. There is a cheaper way to trade covered calls: you can use a synthetic option instead ...
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