Options Made Easy: Your Guide to Profitable Trading, Second Edition

Chapter 5 Major Learning Points

In this chapter we’ve learned about Synthetic Calls and Covered Calls. Let’s compare the two strategies:

	Synthetic Call	Covered Call
Strategy
Outlook	Bullish, although you are insuring your stock purchase.	Mildly bullish. You expect a steady rise.
Rationale	To buy a stock for the medium or long term with the aim of underwriting your downside in the meantime. If the stock price rises more than the cost of the bought put option, you will make profit. If the stock falls, you will lose money, but your losses will be capped ...