Potential to benefit from stock upside during the long trading duration of covered call (a few months to one year-plus).
Be informed about the risk of early exercise by the buyer of short calls (short call assignment) and keep a backup plan ready.
Learn more about the WisdomTree International LargeCap Dividend fund, an income-based international equities ETF that focuses heavily on the United Kingdom.
In this strategy, combining a long position in an underlying stock with a short call provides capped returns on the upside and limited loss potential on the downside.
During the holding period of one year, the trader will be entitled to $2 total dividend ($0.5 * 4 quarters).
Creating a covered call position on a high dividend paying stock can completely change the profit and loss.
This article explains how a covered call on dividend paying stocks can be used to generate higher returns with less risk.
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