Suppose we have already understood the use of options.
We will start with the tools. Produce cash flow.
From the picture it is a purchase of long future size 1.0.
After that we will use A strategy called cover call to produce cash flow by eating premium over time.
until we have a certain level of cashflow
After that we will use A strategy called cover call to produce cash flow by eating premium over time.
until we have a certain level of cashflow
So what is a cover call?
That is, we short call options at a far strike price.
Ex. long futures 3000 size 1.0 + short call options 4500 ( Premium 40.0 )size 1.0
It can be seen that short calls that are far away have an advantage, which is that we definitely won't get an insurance claim because they are far away.
Case 1: Price increases to 4600
We will profit from the future that we opened and lose by short call.
long future = 4600-3000=+1600
If the short call is exercised, there will be a loss of 4600-4500 = 100-40 = 60
total profit= 1600-60=1540 per unit
Therefore, it can be seen that when the price goes down, we will make a loss, so the second strategy arises. It depends on the user whether to choose a high risk type or a low risk type, such as
The risk is called You can use high costs. That is, we place the full amount of money or already have shares in hand. We expect that in the future the stocks we hold will be worth more than the ones we hold today.
So what should we do here if that particular stock is in a time when If the market is in a downtrend for a long time, you can play the first strategy alone or add complexity by doing Protect against downside risks by
Protective Put is a long put option. You must understand this too. You should take some of the profits and buy them. So that our costs will not be lost.
long call 3000 size 1.0
short call 4500 pre 40.0 size 1.0
long put 3000 size 2.0
In the end, no strategy is the best, it is only good for a certain period of time. So don't forget to cash out and go live your life.
"Move forward, move forward together"
