Using Covered Calls to Shield Your Long Positions
Covered Calls: An Overview
Covered calls are a type of options trading strategy used by investors to generate extra income from their existing stock holdings. The strategy involves selling call options on a security that the investor already holds in their portfolio, with the investor keeping the option premium but giving up any upside beyond the strike price of the call option.
This is a popular way of generating extra income from stock holdings, as the investor has limited downside but can benefit from increased income via the option premium.
Using Covered Calls to Hedge Long Positions
Investors often use derivatives to hedge long positions in the stock market, with covered calls being one such strategy. Derivatives are financial instruments whose value is derived from the underlying assets, and by using derivatives, investors can protect their gains by offsetting potential losses with a corresponding derivatives position in the opposite direction.
For example, a long portfolio of stocks can be offset with a short position in future options or a put option. This hedging strategy allows investors to reduce their exposure to market risk and maximize their return on investment.
How can MarketXLS help?
MarketXLS is a powerful Excel-based tool that provides traders, investors, and professionals with the tools and insights they need to make better investment decisions. The platform offers real-time financial news and reports, access to technical analysis features, stock and fundamentals data, screening tools, and more.
With MarketXLS, investors can create custom formulas and analysis to assess the performance of their holdings, execute sound portfolio strategies, and customize their own reports. The platform provides comprehensive financial data, analytical tools, and actionable insights that empower you to make smarter investment decisions.
Relevant MarketXLS Functions on Covered Calls
MarketXLS offers several functions related to covered calls, including:
|Function Title||Function Example||Function Result|
|Short % of Float||=ShortSharesPercent(“MSFT”)||Percent of company’s shares that are being shorted. This information may be delayed because of the rules around reporting.|
|Volume Average Fifty Days||This function calculates the average volume for the past X calendar days in the given period. This value is updated everyday at around 5PM EST.|
|Volume Average Hundred Days||This function calculates the average volume for the past X calendar days in the given period. This value is updated everyday at around 5PM EST.|
Use AI driven search for all functions on MarketXLS here: https://marketxls.com/functions
Download from the link below, a sample spreadsheet created with MarketXLS Spreadsheet builder
Note this spreadsheet will pull latest data if you have MarketXLS installed. If you do not have MarketXLS consider subscribing here
MarketXLS offers several templates that can help users implement covered call strategies. Below are some of the most relevant templates for covered calls:
|Template Title||Template Link||Screenshot|
|Covered Call Option Strategy||https://marketxls.com/template/covered-call-option-strategy|
|Collar Option Strategy||https://marketxls.com/template/collar-option-strategy-3|
Use AI driven Search for all templates on MarketXLS here: https://marketxls.com/templates/
Relevant blogs that you can read to learn more about the topic
Covered Calls: What They Are & How They Protect Your Investment
Covered Calls – What They Are & How You Can Profit (With Marketxls Data)
Mitigate Risk with Covered Calls
Gaining an Edge with Covered Call Backtesting
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