What is a Covered Call Strategy? A covered call strategy owns shares of a publicly traded company, while selling or writing call options on the same assets.
The reports provide buy- and sell-side details for implementing these strategies, as well as key metrics for evaluating the profitability and risk associated with the trades. The reports only indicate the strategy for opening the strategies; you must choose when and how to close or extend a strategy based on your own planning, goals, and research.
It is important to remember that you will need to manage the positions and close them if needed. There will be no future reports pertaining to a specific trade. Not all underlying stocks will be reported on daily.
Fidelity provides both a tabular summary of the reports and the full PDF of each with its own glossary.
Only reports for the current trading day will be available. The reasoning for the trade recommendations is provided in detail in the report, and the key metrics for evaluating the trades are provided.
These reports are not intended to be the sole source of your research on these strategies, and should be paired with research into the underlying stock, as its price changes over time will determine the profit or loss of your strategy. Remember that the reports do not contain or consider tax information or trading costs such as commissions.
Before entering into a trade, you should consider the tax implications and factor the trade costs into your assessment of the strategy. Top How can these strategies be profitable? If you already own the underlying stock, a covered call strategy can be a relatively inexpensive way to increase your return on this stock ownership.
Both calendar and calendar strategies may enable you to make a significant return even if the stock price stays flat for the duration of the strategy. Calendar spreads normally offer higher potential return rates, and do not require the purchase of stock, but they also carry greater risk of loss.
Top What do the Key rankings mean?
Strategies are evaluated on a five Key scale in which one Key indicates a very risky strategy, while 5 Keys indicate less relative risk. Top How are the From and To limits calculated for the report search?
Searching outside these values will not return any results. Top What are the commentary reports? These reports are updated throughout the trading day, and include information for opening trades, but not for closing trades or strategies.
These reports are only issued on days when the market is open. Not every equity has an option trade that makes sense each day. Top Why are the trades different from yesterday? Stock and option prices change, so the trades can change as well. Typically, the trades will look very similar, but they are always the result of the latest calculations.
Top When I check my quotes for the trade, I see a different credit or debit than the one that appears in the report. What should I do? If you decide to make the trade, enter the debit or credit or better in the report.Options Trading and Its Risks Important Information from Fidelity Investments please contact Fidelity.
Important Information about Options Trading and or when writing a covered call option, you can lose % of your investment. Covered call writing of equity options. Level 2* Level 1, plus purchases of calls and puts (equity, index, currency and interest rate index), writing of cash covered puts, and purchases of straddles or combinations (equity, index, currency and interest rate index).
A Good Option: Covered-Call Funds. A crop of oft-overlooked funds deserve a second look for income investors wary of what higher rates will do to their bond portfolios.
From. To. Message. When you sell a covered call, also known as writing a call, you can usually buy back the option in a closing purchase transaction, perhaps at a loss, and take back control of your stock.
Next steps to consider. and call FIDELITY to be approved for options trading. Supporting documentation for any claims, if appropriate, will be. Prior to trading options, you must receive a copy of Characteristics and Risks of Standardized Options, which is available from Fidelity Investments, and be approved for options trading.
Supporting documentation for any claims, if applicable, will be furnished upon request. Covered calls, it would seem, fit only into the “income-oriented” type of investments since the premium received from selling covered calls does two things. First, it increases cash income, and, second, it places a limit on potential stock price gains, because the sold call limits potential stock price appreciation.