The Call in the Covered Call usually offers protection for around 3% movement in the underlying in a month.
It depends on the underlying IV - here I assumed the stock has a modest IV of around 32-34 which is the usual ATM IV for "low volatile" stocks.
Once the stock falls by >3% the covered call starts to make mark to market losses unless you intent to hold the underlying stock until it "comes back" (maybe the trade turns out to be an investment
.
So yeah, it could be considered as rent, but you may lose a part of the house.
If we are starting off with a sideways trading range kind of hypothesis, I think it might be worth trying out the short strangle.
It depends on the underlying IV - here I assumed the stock has a modest IV of around 32-34 which is the usual ATM IV for "low volatile" stocks.
Once the stock falls by >3% the covered call starts to make mark to market losses unless you intent to hold the underlying stock until it "comes back" (maybe the trade turns out to be an investment
.So yeah, it could be considered as rent, but you may lose a part of the house.
If we are starting off with a sideways trading range kind of hypothesis, I think it might be worth trying out the short strangle.
