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Posted On: 08/21/2021 9:26:09 PM
Post# of 87117
Re: riskreward007 #54219
it's an excellent way to hedge your bets. the "risk" isnt bad persay.
instead of you deciding to sell the 100k shrs for the example given. you have to give them up for that strike price that you sold those contracts for. It's not a bad deal...you got the premium in hand plus you sold 100k shares at the strike price..the premium was payment to offset for the potential of having to sell at a specified price. the only down side is you lose the future earnings potential..BUT!! The share price could dip and it will..you can buy back your 100k shares at a lower price..so you are still up.
covered call contracts have their merits.
instead of you deciding to sell the 100k shrs for the example given. you have to give them up for that strike price that you sold those contracts for. It's not a bad deal...you got the premium in hand plus you sold 100k shares at the strike price..the premium was payment to offset for the potential of having to sell at a specified price. the only down side is you lose the future earnings potential..BUT!! The share price could dip and it will..you can buy back your 100k shares at a lower price..so you are still up.
covered call contracts have their merits.
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