Chapter 5 Major Learning Points

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

 Synthetic CallCovered Call
Strategy

OutlookBullish, 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 ...

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