It's been a while since I've traded or bought physical bullion. Getting back in the game.
~ ~ ~ ~
First covered call ever. Much thanks to Andy Tanner's 4 Pillars for helping explaining this better. I always had theoretical knowledge of this, but like anything, inspiration without perspiration is usually sterile.
But first, what is a covered call?
Wiki says:
A covered call is a financial market transaction in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities. If a trader buys the underlying instrument at the same time the trader sells the call, the strategy is often called a "buy-write" strategy. In equilibrium, the strategy has the same payoffs as writing a put option.
If R-Kelly were to do his usual dictionary definitions, a straight up G-Funk definition would be:
Yo dog, I like this thing, Imma buy a 100 pieces of it and sell you the option to buy it at a future time for a future price. In case prices go up, you are already locked in at this price. If it goes down, no worries, you can buy at the future lower price. Either way, this insurance dog, is cheap. Good for you for risk management, good for me to generate a little cashflow. I give up a little upside gain, but hell, it limits my downside risk and if the market does nothing and goes sideways like yo mamma, it's all gravy.
Underlying Asset: 100 shares of SLV (at the time was $14.91) or $1491 in play -- this was purchased previously at $16.00 a share
