Options for Risk-Free Portfolios: Profiting with Dividend by M. Thomsett

By M. Thomsett

A sophisticated strategic technique utilizing techniques to minimize marketplace dangers whereas augmenting dividend income, this title moves past the fundamentals of shares and ideas. It indicates how the 3 significant segments (stocks, dividends, and concepts) are drawn jointly right into a unmarried and powerful technique to maximize source of revenue whereas getting rid of marketplace probability.

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Additional resources for Options for Risk-Free Portfolios: Profiting with Dividend Collar Strategies

Sample text

Options traders need to monitor in order to act quickly if and when underlying price changes occur in a negative direction. Risk, even for uncovered calls, based on high probability trading strategies, may be quite low. As a first step, focusing on calls expiring within one month or less reduces risk due to accelerated time decay during the option’s final month. From there, uncovered calls can be selected based on a combined analysis of implied volatility and probability (based on standard deviation, for example).

But given current low market rates, the money market is no longer attractive to investors seeking decent returns. Dividends are the answer. But risk is the nagging attribute that keeps so many investors out of stocks. What is the solution? There is a way to exploit dividend yield to create consistent and high returns, while also managing risk. The solution is to position a portfolio to forget about capital gains from stock, or premium gains from options. Both stock and options can be structured to serve as the vehicles to generate exceptionally high returns from dividends while also setting up strategies to manage risk and even to eliminate it completely.

For example, a short call with probability above 80% is quite conservative, especially when implied volatility is also at a maximum. However, such positions require continual monitoring to avoid unexpected price movement and the possibility of exercise and a net loss. If traders consider “low risk” to mean the assured net profit even without needing to monitor a position, that is an unrealistic expectation. Options traders need to monitor in order to act quickly if and when underlying price changes occur in a negative direction.

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