Today, I bought KSS covered call where I bought 100 shares @ 19.04 per share and selling the at-the-money call 19 strike for 1.60.
Buy buying the covered call, I am limiting my upside by making a max profit of 1.56 x 100 shares = $156 max profit or 8.19%.
This limited profit also protects me by 8.19% at the stock price of $17.44. If stock goes below $17.44, I will start to lose money.
Now the stock could go up 20% , down 5%, or stay sideways and in all those cases, I will make money. If I'm wrong, I will own the stock at a discount of $17.44 per share.
Buy buying the covered call, I am limiting my upside by making a max profit of 1.56 x 100 shares = $156 max profit or 8.19%.
This limited profit also protects me by 8.19% at the stock price of $17.44. If stock goes below $17.44, I will start to lose money.
Now the stock could go up 20% , down 5%, or stay sideways and in all those cases, I will make money. If I'm wrong, I will own the stock at a discount of $17.44 per share.
Comment:
6/4/2020- Closed position for nearly max profit as my position was deep in the money. Took $140 profit on the stock and moved on to a different stock.