Covered call trading is not like directional trading which has an objective to time the movement of a stock in the direction it is moving. Covered writing is a game of regular, incremental returns. The covered call writer’s objective is to collect the option premium for income without taking any damage to the downside of …
If options were always fairly priced, then we would expect the option price to always imply a level of stock volatility that is more or less in line with historic volatility (HV). But this not always the case. For example, two stocks are trading at $20 each with current month calls at $20; one calls …
How To Use Volatility in Selecting Covered Call Trades Read More »
While there are many factors that determine option prices, stock option premiums move in unison with the underlying stock price. The most popular method for determining option value is the Black-Scholes Model. There are six factors in this model: Stock price is the most important factor in an options price as changes in stock price …
