Our analysts create simulated covered calls by selling a short-term call while simultaneously buying a long-term call at a lower strike price. The goal for these trades is to generate a 25 to 30% annualized return. By changing the number of contracts to keep similar dollar amounts invested in each position, we add an additional level of diversification to this portfolio.
In the best case-scenario, your sold calls are in-the-money during the week before expiration. In that case our analysts will often be able to exit the position for a larger profit than we originally targeted. To do this, you buy back your sold calls and sell our long-term call for a net credit. When we exit these trades early, the credit will generally be larger than the difference between the strike prices of our options.
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