Comment by King-of-Kingson Feb 17, 2025 4:41am
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Post# 36456111
RE:Investment Opportunity
RE:Investment Opportunity
Covered Calls is an option you give someone to buy the shares you own sometime in the future at an agreed price (Strike Price). For it, you get paid a certain amount of fees... It's called covered because you already own the stock otherwise it would be a naked option and it's risky...
There are 3 types of such options.. I1) n the Money, 2) At the Money, and 3) Out of the Money... The fee you get for selling these options goes from highest to lowest... ie If RBC is trading at 100 and you sell a Out of Money Option, you're writing an option at a strike price of let's say $110... If RBC jumps to $120, the buyer of the option will exercise their option and you'll have to sell them your RBC shares for $100.... but you keep our fee that you charged them for the option...
If you sell them an At the Money option, it means the option Strike Price is set at $100... the fee you can charge is ibviosuly higher... and If you sell them an In the Money option, the Option Price could be at $90... which means you can charge them an ever higher fee,,,,
HMAX only writes At the Money options...and only on a maximm of 50% of their portfolio,,, So if the market is going up up and up, only 50% if their shares will potentially be sold at the Strike Price and that will limit the potential Capital Gain upside iof the portfolio....
HMAX will also collect all the Dividends that these shares earn, plus the fees from the options could be substantial... that's how they can offer a higher yield
By buying HMAX, you're giving up some potemtial Capital Gains, in exchange for a higher Yield of 14-15%... HMAX's Target Yiled is 13% stated in thier mission, so currently we're earning more than that.
And yes, when a stock splits, HMAX also participates in that just like any other shareholder..