Visual Quantitative Finance: A New Look at Option Pricing, Risk Management, and Structured Securities

11. Covered Calls, Condors, and SynAs

This chapter looks at two common structured securities, covered calls and iron condors. It also takes a more detailed look at synthetic annuities (SynAs) introduced in Chapter 7, “Investment Profiles and Synthetic Annuities.” I chose these three structures because they provide differing perspectives and some general points of reference.

Covered calls are one of the simplest and most popular option strategies. They also provide a natural context in which to consider put–call parity. Iron condors represent a different but important point of view. Condors are well suited for people who want to take advantage of option time decay and don’t necessarily have a desire to invest in the underlying security.

Synthetic ...