Covered Calls

Covered calls are good for a safe return.
These are really useful for making regular profits if u want to trade in F&O.
Risk is very less compared to other F&O stategires.
Ofcourse, one has to wet oneself by diving in waters.
I have been trying to swim in these waters after reading Gujral's book.
Have had hicups in the beginning and am more comfortable now. Leet us all share our knowledge to get an annualized return far superior to any other trading system compared to the risk.

Hello hsarora

Its a good idea to have a seperate thread for this topic. But in past there have been too many threads on this very topic and some how the thread, dosent last beyond discussing the basics definations etc.

Can you give some examples of scrips and strike price etc to take the discussion further. And how to manage the trade during the month.

Lets take for example

1. Nifty Covered Call

Buy 100 NF @ CMP 3405
Sell 100 Nifty Calls SP 3450 @ CMP 65

Here onwards the risk on the downside will have to be managed for the entire month. So we put stoploss for NF 3380

The above trade is given as an example for discussion and learning, not as a recomendation.

Regards
Sanjay

Sorry but can u elaborate on this ...

AGILENT

Would like to know more about your experiences on this strategy. And would like to contribute whatever little I know.

I have been trading on this strategy. It works well in range bound market or uptrending market. The only down side is when there is a big corrcetion. Otherwise I found this staretgy gives decent returns on those stocks as well, which do not give much on buy and hold strategy. And for stocks which have breakouts it leaves you with a feeling of loosing chunk of profits. I have been into both kind of situations.

Let us give momentum to this discussion. Hopefully other members who are very good at TA will also add their inputs for increasing the risk return trade off on this strategy. TA can help in adopting a suitable cover for this strategy when there is a threat of big correction or a big breakout on upside so that we get some more protection on downside and do not loose much on break out.

I find covered call is good for stocks where one is waiting for a breakout and as soon as breakout takes place one can buy another OTM call to catch some more profit. Since many times break out turns out false breakout or the breakout does not take place at all, in those cases you are still having some decent profit. Senior members good at TA are requested to contribute to this from their knowledge.

sanjay

Could we move this discussion to where it belongs, the derivatives thread.