Premium Cover

Here are some more information for Premium Cover:

Covered Call Writing Using the Over Write Strategy

Writing covered calls is an excellent way to use options in a low risk way, to generate additional income on your existing portfolio of shares. If you buy shares at the same time that you write the calls then the transaction is known as a buy-write. If you write calls on shares you already hold then it is called an over-write. The covered aspect comes from the fact that you own the underlying stock or share. If the contract is exercised then you have the underlying goods to fulfil the contract ( like the car in our first example). There is another type of call writing called naked. NEVER, EVER write naked calls - you are exposing yourself to UNLIMITED RISK.

The first technique is called over writing, so let's take a look see how it works. Before we start there is one difference between UK equity options and US equity options. In the UK one option contract relates to 1000 shares, but in the US one option contract relates to 100 shares of stock.

Imagine you have a portfolio of shares that you have held for some time and these are mainly UK 'blue chip' companies. One of your shares is British Airways which you have held for some time, and you have 1500 shares bought at 200p. The market price at the moment is 365p per share. It is June and you decide to look at the current option chain for the next expiry period which is September. The option expires on the 15th September. You look at all the strike prices available and see that there are contracts at 330p, 360p, and 390p. You check the premium of the contract at 390p and see that the premium is currently 16p. You decide to sell ONE contract for which you receive a premium of 1000 x 16p = £160. (the premium is multiplied by the number of shares for one contract i.e. 1000). Please note - you still have 500 shares left in your portfolio as you do not have enough to write a second contract. You have now sold 1 contract which obligates you to supply 1000 BA shares at 390p on or before the 15th September (Amercian Style Contract) to the owner of the contract if exercised in the period. In return for this you have been paid a premium of £160 which is yours to keep whatever the outcome of the contract. OK - lets look at the possible outcomes of this contract as follows:

Outcome A - the company becomes a takeover target and shares jump to 520p

In agreeing to the contract at 390p per share, you have lost out on the takeover news and have missed the opportunity of 'making' 1300 (130 x 1000) on your share holding. This is the downside of writing a call option on your shares, that you could miss out on a rise in prices during the contract period. This is undoubtedly true, however there is no guarantee that you would sell your shares at this point, in other words it is only a paper profit had you kept them. The £1300 lost 'opportunity' profits are offset by the premium you have received to £1140.

Outcome B - the share price falls to 295p as competition increases in the industry

The price has fallen during the period, and the contract expires. Whilst the price has declined by 65p, this is partly offset by the premium you have received, reducing your 'paper loss' to 49p per share. You still retain your shares and any future dividends.

Outcome C - the market is quiet and the share price closes at 390p

You have made a small 'paper profit' here, and a real profit of £160.You have kept your shares and any future dividends. The reason you would probably keep your shares is that with dealing costs etc it would not be worthwhile for someone to exercise, although you can never be sure. I have been exercised when the strike and market price close at the same price, but I have also been left unexercised with prices very slightly above the strike. It depends how your broker closes out positions and reconciles their contracts - sometimes you may be lucky, other times not.

Now, with B and C, you still retain your shares so what might you do? - write another call to earn some more income. You look to the next series (probably Dec) and write another option earning more income. With B, where the share is now trading at 295, you might look for a strike at 320 - 340, and with C, probably around 430 - 440. And so on, until on one contract you will be exercised. The most options I have written on the same block of shares is 4! Finally on the 5th contract the price went up and I was exercised. Please remember it is possible to write a contract so that you have built in a loss. Suppose you purchased some shares for 250p which then declined in price , and you wrote a contract at 225p with a premium of 10p. If it was exercised you would be receiving 235p (225+10) for shares you had paid 250p. Now, on occasion I have done this deliberately where I wanted to get rid of the stock for some reason. PLEASE DON'T DO THIS BY ACCIDENT. There are lots of packages around that will give you a graphical display of the breakeven point - most of these are free.

Finally, I mentioned dividends a couple of times above. Naturally, whilst you hold the shares you receive any dividend payments from the company. You should be aware when dividend payments are due for two important reasons. Firstly you may decide not to write an option as a dividend is payable in the next few weeks and you decide to wait. Secondly If you do write a call and a dividend is due shortly, the likelihood of exercise is much higher right before a dividend payment. The perfect outcome of course is where you keep your shares, your premium, and a dividend is paid during the contract ! - it does happen.

About the Author

Anna Coulling is a full time currency trader providing free advice and help to women traders and investors around the world via her web site. She has been trading for over 15 years, and has experience in a wide range of financial instruments including stocks,shares,options,spread betting and futures. For more information or to contact Anna please click on the link below : trading,investing,women,traders,shares,stocks,currency,forex,options,calls,puts,candlesticks.

How much will you pay for the government health care premium?

If you don't know, then do you think you will pay less than 500 a month? Do you think you will have a co-pay, or will the premium cover All cost?

No one knows how much at present, but it will less than you have to pay now.

I am always amazed how many Americans seem not to be aware about the issues with healthcare relying on FOX and other sources to spread misinformation about the healthcare system of the USA and those abroad.

First of all, Obama wants to make insurance more available to all and change the system so that it is cheaper. He also wants change so that the insurance companies find it harder to get out of paying for treatment. The system he is proposing looks similar to that which works in Holland and Switzerland where private companies are involved in providing insurance.
Second, of course universal health-cover sucks. That is why we in Western Europe have it. We think, hmm, our healthcare system sucks. I know, lets keep it. I guess that is the same with Japan and Canada as well.
Third, Obama campaigned on reforming the healthcare system. He said he wanted to make insurance more available and he was elected by the American people to do this.

FACT - the US has higher death rates for kids both for kids aged under one and those under five than western European countries with universal health coverage.
FACT - American insurance companies push up prices and work to stop paying out claims on those they cover.
FACT - the USA spends more on healthcare PER PERSON than any other nation on the planet.
That means that a dead American four year old would have had a better chance of life if they were born in Canada, France, Cuba, Germany, Japan etc, all of which have universal health coverage.

Many do not agree with my arguments, but I can back mine up. Those against them can not. Last of all if you do not like the policies that Obama was elected to bring in, he can always be voted out of office in 2012.

Blue Cross parent to discuss premium increases
By Bruce Japsen | The parent of Blue Cross and Blue Shield of Illinois has been summoned with other health insurance giants to Washington next week to discuss premium increases with U.S. Health and Human Services Secretary Kathleen Sebelius.

Thanks for visiting!