Optimizing Covered Call Strategies: Blending ITM and OTM Strikes in Dynamic Markets

Optimizing Covered Call Strategies: Blending ITM and OTM Strikes in Dynamic Markets

Optimizing Covered Call Strategies: Blending ITM and OTM Strikes in Dynamic Markets In the realm of options trading, particularly with covered calls and cash-secured puts, the judicious selection of strike prices is paramount. This choice is not a one-size-fits-all decision but rather a dynamic process heavily influenced by prevailing market conditions. By strategically combining in-the-money (ITM) and out-of-the-money (OTM) strikes, investors can craft a resilient portfolio designed to align with various market sentiments, from bullish trends to more volatile or bearish environments. Understanding ITM and OTM Covered Calls Covered calls are a popular strategy for generating income from owned shares. The core decision involves choosing a strike price for the call option. Out-of-the-money (OTM) strikes, where the strike price is above the current share price, are typically favored in normal to bullish markets. They offer the potential for a dual income stream: the premium received from se…