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This Strategy offers investors: |
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A conservative equity portfolio:
The portfolio is composed of large cap stocks and covered calls. |
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Capital
gain potential:
The portfolio
seeks to achieve price appreciation from the stocks held. |
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Cash
flow potential:
The portfolio
seeks cash flow from the sale of covered calls. |
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Moderation of volatility on equity returns:
The strategy is less volatile than the S&P 500. |
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The potential for attractive cash flows:
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Estimated annualized option premium income |
6 - 8 % |
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Estimated annualized dividend income |
2% |
| Targeted
total annual cash flow |
8 - 10% |
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A "Buy-Write" strategy, also called
a "covered call", is an investment strategy in which the
investor buys a stock or a basket of stocks and writes (or
sells) call options that cover the stock position. The strategy
can be used to enhance portfolio returns under certain market
conditions and to reduce volatility. In down markets, the option
premium received cushions the price decline in an equity
portfolio. The trade-off is that in strong equity markets, the
upside potential of the equity investment is limited. |
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