Covered Calls

[Glenn2]

I have looked at your online "Options" material and this forum for how to write covered calls and track performance. I have an alternate approach and I would appreciate your view on whether this would work or has some underlying issues.

Example: Writing a coverd call on Stock XXX at a price of $1.10 to receive a Premium of $0.05 expiring in 1 month. It costs me $1 to but the stock.
1. Create a new investment title "XXX Covered Call $1.10"
2. Buy 1000 shares at $1
3. Do a "Distribution" transaction, selecting type "Covered Call Premium" being a user defined type, to pay 1000 x $0.05 = $50
4. If the Option is triggered at $1.10 then Sell the share at $1.10, otherwise do nothing.

The benefits of this approach are:
- minimal transactions
- performance of the covered call easy to track

[Mark]

Hi Glenn2,

Nice idea. I don't see a problem with this approach. One drawback may be that you aren't pricing the option on a daily basis after you sell it, so any market variations in the price of that option won't be reflected in your portfolio value. If you don't care about this, then your approach seems very good to me. Also, if you were to buy back the option, you could simply record a negative distribution in this "Covered Call Premium" distribution type.