Current Options
Disclosure Document
(PDF Format) 


Securities Future 
Disclosure Document
(PDF Format) 



Securities Corporation

780 Third Avenue
New York, NY 10017

Summer 2008, Volume X, Issue 2    

Considered Responses:
Selling Covered Calls?


Can investors reap the rewards of selling covered calls without ever delivering their low-basis shares?


Yes, the call seller can sell European Style Calls.  While standard listed options are American style where the option holder can exercise at any time, it is possible to create European style options that are exercisable only at maturity.   European FLEX options can be created on virtually any stock that already has listed options trading.  Like their standard counterparts, FLEX options are exchange-traded options backed by the OCC, where investors can get the same price transparency and liquidity that standard options have.  To create these options, though, the notional amount covered must exceed $1 million notional (or 25,000 shares, whichever is less).  Since these options are European style, the covered call seller can simply buy them back at any time before expiration, thus guaranteeing that shares are not delivered if the stock is above the strike price.

While it might be ideal to use FLEX options on low-basis shares, an investor could still use standard American style options and not deliver low-basis shares.   Instead of delivering shares they already own if a call were exercised, they could simply buy shares in the open marketplace and deliver those against the assigned call.

This article and other articles are provided for information purposes only.  They are not intended to be an offer to engage in any securities transactions or to provide specific financial, legal or tax advice. Articles may have been rendered partly inaccurate by events that have occurred since publication.  Investors should consult their advisers before acting on any topics discussed herein.   





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