After you sell a
covered call there
is not much else you
can do. The danger
with selling a
covered call is that
the price of the
underlying stock may
fall and you will
not be able to cut
your losses.
If the price of the
underlying stock is
falling, you could
however, buy back
the stock option you
have already sold.
This strategy is
useful when you
believe that the
underlying stock
will not bounce back
to recover and you
want to get
disentangled from
the stock option you
have sold.
This strategy should
not be used too
often. If the
underlying stock
bounces back you
will absorb a loss
instead of a profit
by rushing to buy
back your stock
option.
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