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Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks by W. Edward Olmstead - Professor of Applied Mathematics McCormick School of Engineering and Applied Sciences Northwestern University

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When looking for a favorable set up to employ this covered call strategy, watch for those days in which the stock closes with a price that is just below a strike. If the stock then opens higher the next day (but not more than 10 percent higher), this allows you to capture a large intrinsic value from the sale of the option in addition to its time value. This approach will provide the greatest protective cushion in case the stock price does begin to fall (see Example 2).

Make sure that the covered call has some time value included in its price. This guards against an early exercise that would require you to sell your stock before January 1.

It should be noted that after the trade is initiated, the maximum return from the stock has been ...

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