A covered call option
involves holding a long position in a particular asset, in this case U.
This, says Schroders, is achieved through an actively managed portfolio of higher-yielding global property securities and REITs with a covered call option
overlay to enhance the yield.
2002-66, the Service held that if a grantor of a qualified covered call option
(QC) holds a put option on the same underlying equity, the purchased put will cause the stock and the QC to be part of a larger straddle and ineligible for the Sec.
Covered call option
premiums will be treated by the Fund as either short-term or long-term capital gain or loss, depending whether the call option expires, is exercised or cancelled pursuant to a covering transaction, and the timing of such transaction.
1092(c)(4), a taxpayer holds a qualified covered call option
if the following five factors are met at the time the call option is written: (1) the option is traded on a national securities exchange; (2) the option will not expire for more than 30 days; (3) the option is not deep-in-the-money; (4) the option is not granted by an options dealer; and (5) any gain or loss with respect to the option is not ordinary income or loss.
As LCM writes covered call options
on more of its portfolio, it becomes more subject to the risks associated with covered call option
writing and its ability to benefit from capital appreciation in holdings on which options have been written becomes more limited.
Although the Fund will receive premiums from the options written, by writing a covered call option
, the Fund forgoes any potential increase in value of the underlying securities above the strike price specified in an option contract through the expiration date of the option.
Fiduciary Asset Management was established as an independent investment firm in 1994 and has managed covered call option
portfolios for clients since 1997.
I decided to sell covered call options
on my shares, aiming to profit before they advanced.
The investment objectives of the Fund are to provide Unitholders with (i) monthly cash distributions; (ii) the opportunity for capital appreciation; and (iii) lower overall volatility of the Portfolio returns than would otherwise be experienced by owning the Equity Securities held by the Fund directly; by investing in the Portfolio and writing covered call options
on no more than 33% of the Equity Securities of each issuer held in the Portfolio.
To pay his living expenses, he sells covered call options
- contracts to buy a stock that he owns.
The writing of covered call options
is thus most appropriate when you have a basically "steady" market opinion.