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    tive Put Strategy Look for an up-trending, optionable stock. For this example, let’s call it XYZ. Let’s assume XYZ stock is currently trading at $69 per share. Assume that currently we are in the first, second or third week of February. You buy 100 stocks of XYZ.

    Next, you write a covered call on XYZ, at a strike price of 75, for Ma

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    Stocks - CC – PP (Stocks - Covered Call – Protective Put) Strategy We all know that trading stocks involves stress and risk. At the same time it can also be highly profitable. Trading can give the most return on investments as compared to other investment strategies including real estate. For example, savings, money market accounts or CDs may give a return of 2 to 5% at best. You may expect a 10% rate through mutual funds. However, under the current economic conditions, such a yield may be hard to come by even with a long term investment. Also, you do not have control over your investments and you can not be sure if your financial consultant either. What then is a low risk and more profitable alternative?

    The purpose of this article is to illustrate one such low risk, high profit trading strategy, which combines stocks and options.

    Covered calls and protective puts are enabled in most of the trading accounts by major brokers. (Ameritrade, Scottrade, E-trade, etc)

    Covered call is – you buy stocks and sell 1 call (contract) for every 100 stocks you buy/own.

    Protective put is – buy 1 put for every 100 stocks you own. In this strategy we buy a put which expires at least 6 months later.

    When the stock price goes up, call price goes up and put price goes down. Elapsed time will have negative impact on put price.

    Here’s the Stocks - Covered Call – Protective Put Strategy Look for an up-trending, optionable stock. For this example, let’s call it XYZ. Let’s assume XYZ stock is currently trading at $69 per share. Assume that currently we are in the first, second or third week of February. You buy 100 stocks of XYZ.

    Next, you write a covered call on XYZ, at a strike price of 75, for Mar

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    a return of 2 to 5% at best. You may expect a 10% rate through mutual funds. However, under the current economic conditions, such a yield may be hard to come by even with a long term investment. Also, you do not have control over your investments and you can not be sure if your financial consultant either. What then is a low risk and more profitable alternative?

    The purpose of this article is to illustrate one such low risk, high profit trading strategy, which combines stocks and options.

    Covered calls and protective puts are enabled in most of the trading accounts by major brokers. (Ameritrade, Scottrade, E-trade, etc)

    Covered call is – you buy stocks and sell 1 call (contract) for every 100 stocks you buy/own.

    Protective put is – buy 1 put for every 100 stocks you own. In this strategy we buy a put which expires at least 6 months later.

    When the stock price goes up, call price goes up and put price goes down. Elapsed time will have negative impact on put price.

    Here’s the Stocks - Covered Call – Protective Put Strategy Look for an up-trending, optionable stock. For this example, let’s call it XYZ. Let’s assume XYZ stock is currently trading at $69 per share. Assume that currently we are in the first, second or third week of February. You buy 100 stocks of XYZ.

    Next, you write a covered call on XYZ, at a strike price of 75, for Ma

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    /p>

    The purpose of this article is to illustrate one such low risk, high profit trading strategy, which combines stocks and options.

    Covered calls and protective puts are enabled in most of the trading accounts by major brokers. (Ameritrade, Scottrade, E-trade, etc)

    Covered call is – you buy stocks and sell 1 call (contract) for every 100 stocks you buy/own.

    Protective put is – buy 1 put for every 100 stocks you own. In this strategy we buy a put which expires at least 6 months later.

    When the stock price goes up, call price goes up and put price goes down. Elapsed time will have negative impact on put price.

    Here’s the Stocks - Covered Call – Protective Put Strategy Look for an up-trending, optionable stock. For this example, let’s call it XYZ. Let’s assume XYZ stock is currently trading at $69 per share. Assume that currently we are in the first, second or third week of February. You buy 100 stocks of XYZ.

    Next, you write a covered call on XYZ, at a strike price of 75, for Ma

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    y 100 stocks you buy/own.

    Protective put is – buy 1 put for every 100 stocks you own. In this strategy we buy a put which expires at least 6 months later.

    When the stock price goes up, call price goes up and put price goes down. Elapsed time will have negative impact on put price.

    Here’s the Stocks - Covered Call – Protective Put Strategy Look for an up-trending, optionable stock. For this example, let’s call it XYZ. Let’s assume XYZ stock is currently trading at $69 per share. Assume that currently we are in the first, second or third week of February. You buy 100 stocks of XYZ.

    Next, you write a covered call on XYZ, at a strike price of 75, for Ma

    Credit Cards: Non Reward Type vs Reward Type
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    tive Put Strategy Look for an up-trending, optionable stock. For this example, let’s call it XYZ. Let’s assume XYZ stock is currently trading at $69 per share. Assume that currently we are in the first, second or third week of February. You buy 100 stocks of XYZ.

    Next, you write a covered call on XYZ, at a strike price of 75, for March. This gives you an additional income, but you have an obligation of selling the stock, at $75. Say you get $150 from writing the covered call.

    However, just because the stock is an up-trending one, and you have already made $150, you can not be 100% sure which direction the stock price might move. So, in this strategy, buy a put on XYZ for a strike price at 70 and expiration of 6 months+. In our case, buy the put for the month of August or later. Say this costs you $800. This gives you a right to sell the XYZ stock at a price of $70, even if it drops below 70 by August expiration. (For a real time example, as of this article date - Feb 2006, see JOYG with current price at ~55, and its option chain with strike price of 60. Its Oct 2006 put was available at ~6.5)

    Scenarios: Let’s consider some scenarios to illustrate how this can be a low risk, high profit strategy.

    Scenario 1: By the March expiration date, if the XYZ stock price goes above $75, the stock will be called out. That means it will be sold from your account. Normally, stocks ‘in the money’ by $0.25 will be automatically exercised.

    Since the stock price has gone up, your put price will decrease. Since the put is in the future, its delta is low. You might be able to sell it for around $600. Higher the stock price goes, put price will decrease. You can wait for a good time to sell before its expiration. The net profit for 1

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