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Understanding Options 2E, 2nd Edition by Michael Sincere

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7

Managing Your Covered Call Position

Now that you have received the premium for your first covered call, you might think that all you have to do is sit back and wait until the expiration date. This is a common but serious mistake. After you press the enter key and submit the order, the real work begins.

After all, stocks are as unpredictable as people (maybe more so), and when you are putting your money on the line, anything can happen. If you don’t properly manage your position, you might let a winning option position turn into a loser.

This is why it’s so important to plan for any possible scenario. Therefore, one of the most useful steps you can take is to create a trading plan, which describes what to do after you sell your first covered ...

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