Explore BrainMass

Explore BrainMass

    Covered call writing strategy

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Assume you are responsible for the management of Bank-ZQ's UK fund and in the process are deliberating a covered call writing strategy. Briefly explain whether it would be wise from the funds perspective to write British telecom call options traded on the Philadelphia stock exchange?

    © BrainMass Inc. brainmass.com November 24, 2022, 11:45 am ad1c9bdddf

    Solution Preview

    When you write a covered call (sell an option), you are giving someone else the right to purchase your stock at a specified price. For that right, you receive a premium. It's a good way to make money. When you write a call, you have a specified month by which the option will expire.
    <br>There are benefits to covered call writing from the funds perspective.
    <br><br>1. You can diversify with many equities
    <br><br>2. You can reduce the initial ...