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CHAPTER 5 - Leveraged Covered Calls with Futures
CHAPTER 5
Leveraged Covered Calls with Futures
Chapter 4 reviewed many different types of calls and found that, on average, long-term deep-in-the-money calls are more profitable than short-term calls. In this chapter, we’ll use this knowledge to implement a classic strategy: the covered call fund.
Traditionally, covered calls are seen as low-risk, low-return strategies, but by applying leverage, we will create an investment that is capable of generating extremely high returns over short periods of time. This chapter analyzes and then backtests this strategy, both by year and in low- and high-volatility environments, in order to determine how it would have performed across a variety of market conditions.
