In addition to jmh’s explanation, see covered call. Also, normally when you do a “buy-write” transaction (see above article), you’re taking the risk that the stock falls by more than the premium of the call option, but in this case, if that were to happen, I can recover any losses by holding the stock until redemption. And to clarify, because I sold call options that expired in November without being exercised, I’m still able to capture any subsequent gains.
Just curious but where are you trading/investing? USA or elsewhere? I’m wondering about the type of options—are they USA or European execution rights?
And, yes, I should have been clear on the potential downside of limiting gain to “during the life of the option”
In addition to jmh’s explanation, see covered call. Also, normally when you do a “buy-write” transaction (see above article), you’re taking the risk that the stock falls by more than the premium of the call option, but in this case, if that were to happen, I can recover any losses by holding the stock until redemption. And to clarify, because I sold call options that expired in November without being exercised, I’m still able to capture any subsequent gains.
Just curious but where are you trading/investing? USA or elsewhere? I’m wondering about the type of options—are they USA or European execution rights?
And, yes, I should have been clear on the potential downside of limiting gain to “during the life of the option”