Abstract: A short covered call strategy is particularly appreciated by portfolio managers. Indeed, they can choose to adopt short-, medium- or long-term strategies. In the case of funds following longer-term strategies, they may need to keep their holdings when stock markets are going down. This does not happen without impacting the portfolio's valuation; investors may feel uneasy in these situations, and thus may withdraw their money from the fund even if portfolio managers try to explain that it is part of their strategy, as they believe the market will bounce back. Therefore, portfolio and fund managers usually sell equity call options during periods when they believe the underlying stock will decrease. As the options' time to maturity corresponds to the length of these periods, the premium they get for selling the call options would compensate for the unrealized loss from holding the underperforming stocks during that time.KeywordsStock PriceCall OptionFund ManagerPortfolio ManagerExpiry DateThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Publication Year: 2014
Publication Date: 2014-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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