Covered calls allow us to turn 100 shares of stock into a much higher probability trade by selling a call against our shares, exchanging immediate cost basis reduction for a capped upside profit potential.
This means the stock no longer needs to move up for us to make money, as we continue to reduce the cost of our shares over time with the short call premium.
The strategy can be costly though, so the tastytrade crew looks at a few variants using options to replace 100 shares of stock. The variants include synthetic stock, poor man's covered calls, and ZEBRAs. They walk through the tradeoffs for each variant, and show you how you can decide which variant to use based on your account size and risk tolerance.
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