Dr. W. Edward Olmstead
For those of you who have been following the Facebook (NASDAQ: FB) trade that was proposed in my blog entry of 8/15/12, the residual option position is now showing a profit of 76%. Since the residual position includes the long Jan 16 call that will be expiring this Friday (1/18/13), a decision needs to be made. The basic choices are: (i) sell the Jan 16 call more »
It has always been possible to use monthly put options to protect the price of a stock through the date of the company’s earnings report, but weekly options are cheaper and offer more flexibility in providing short-term protection. Not all stocks have weekly options, but when a stock does have them, it is prudent to know how to employ them to circumvent an earnings report disaster. A timely illustration of a protective options strategy will be presented for Facebook Inc (NASDAQ: FB), which has its next earnings report on January 23.
The basic goal of the covered call (buy-write) trade is to generate an income stream by selling short-term, out-of-the-money calls against long positions in stocks or ETFs. In the past, this typically has been done by repetitively selling monthly calls. Now that many stocks and ETFs have weekly options, new possibilities are available.
Let’s look at some of the potential advantages to executing the covered call trade by selling more »