I am interested in writing an option over an existing shareholding in TIM. I bought 2000 at 1.90. I think the shares will trade flat for a few months prior to June within the range of 2.10 and 2.20. What are some strategies i could use? My aim would be to either create extra value or lock in a profit. What should i do?
Covered Options Help
- Thread starter pbourk111
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wayneL
VIVA LA LIBERTAD, CARAJO!
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pbourk111 said:
All option strategies have trade-offs. To achieve one aim, you will need to transfer risk somewhere else.
So you must be very clear what you want achieve and where you want to transfer the risk to.
Example: Covered calls are a good strategy in this situation. You can extract some nice monthly income from a stagnant stock. The trade-off is that you still accept all the downside risk on the stock and lose the opportunity to benefit from any upside past the strike. You may be enhance profits with active "management" of the position, if you have the skills.
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with only 2000 shares it is not economical to write calls. you would need at least 10000 shares, but even then you may find the premium is small which would entice you into writing at-the-money, which may be a BAD idea....
