A covered call strategy can potentially work in any type of market, including ultra-volatile markets like the one we’ve been experiencing. Overlays are a very nimble strategy and can be adjusted to current conditions by selling further out-of-the-money calls with an eye toward appreciation of underlying equities should the market bounce. Nothing’s perfect, but in the end, experience tells us that selling call options when selected optimally not only reduces risk but can also benefit the expected return.
To read the full article about options-based strategies in a volatile market, visit:
Should Investors Consider Options-Based Strategies to Help Manage Portfolio Risk?
Important Information:
Options involve risk and are not suitable for everyone. Prior to buying or selling an option, your client must receive a copy of CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS.
Investments in derivatives may be risker than other types of investments. They may be more sensitive to changes in economic or market conditions than other types of investments. Many derivatives create leverage, which could lead to greater volatility and losses that significantly exceed the original investment. Positions in equity options can reduce equity market risk, but can limit the opportunity to profit from an increase in the market value of stocks in exchange for upfront cash as the time of selling the call option. Unusual market conditions or the lack of a ready market for any particular option at a specific time may reduce the effectiveness of option strategies and could result in losses. Investors can lose premium paid to purchase the option if it is not exercised.
