Selling Covered Calls?
Can investors reap the rewards
of selling covered calls without ever delivering their low-basis
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.
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
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