Premium selling
Covered call
Hold the index through futures and sell a call against it.
How it works
The long future gives you the index; the sold call turns part of its future upside into cash today. It is the standard way of getting paid to wait on a holding you already intend to keep, and it does best in a market that drifts up slowly or goes nowhere.
What it costs you when you are wrong
You keep every point of the fall and give away every point of the rise beyond the strike you sold. The premium cushions a small decline and does nothing at all in a large one, so the worst case is a long position in a falling index with a fixed, and by then irrelevant, credit against it.
The position
- 1Sell the call 3 strikes out of the money
- Enter
- 4 trading days before expiry
- Exit
- hold to expiry
- Legs
- 1
Test it yourself
This runs against real historical market data. Nothing is uploaded, nothing is stored, and the result is not a prediction — it is what this rule would have done, on that index, in that year, with the costs shown.