Skill: frankxpj/covered-call-strategy (version 1.0.0)

--- name: covered-call-strategy description: "Covered call portfolio strategy analysis and optimization. Use when the user asks about covered call (备兑认购期权) investment strategy, Roll Up/Roll Down decisions, option strike price selection, portfolio structure optimization, or any questions about combining stock holdings with short call options. Triggers on: 备兑call、备兑权证、covered call、Roll Up、Roll Down、行权价选择、期权组合策略、call option strategy、期权到期决策." --- # Covered Call Portfolio Strategy Analyze and optimize covered call (备兑认购期权) portfolio strategies with full upside/downside scenario modeling. ## Core Framework ### First Principle: Covered Call Caps Upside, Does NOT Protect Downside This is the most common and costly misconception: | Misconception | Reality | |--------------|---------| | "Short call at $580 provides downside protection" | ❌ The call only caps upside at $580. If stock drops to $400, the call expires worthless — stock falls freely | | "Higher strike = more protection" | ❌ Strike price only determines where upside is capped, not where downside is stopped | | "Rolling up protects my gains" | ❌ Rolling up costs premium, reducing downside cushion. It releases upside but reduces the premium buffer | **The only downside protection in a covered call comes from the premium received.** Period. ### Key Metrics | Metric | Formula | Meaning | |--------|---------|---------| | **Net Premium** | Total premium received - Roll/close costs | Downside cushion (the only one) | | **Effective Sell Price** | Strike price + (Net Premium per share) | What you actually get if assigned | | **Upside Cap** | Strike price | Maximum stock sell price before premium | | **Downside Break-even** | Stock cost basis - Net Premium per share | Price where total P&L = 0 | ## Analysis Workflow When user asks for covered call strategy analysis, follow this sequence: ### Step 1: Map Current Position Extract and tabulate: ``` Stock Holdings: | Batch | Shares | Cost Basis | Current Price | Option Positions: | Call | Direction | Strike | Expiry | Premium Received | Current Price | ``` Calculate: - Total shares vs total short calls (must be 1:1 covered) - Net premium per share - Current P&L (stock + options) ### Step 2: Define Strategy Options Common strategies (always include "Do Nothing" as baseline): | Strategy | Description | When to Consider | |----------|------------|-----------------| | **Do Nothing** | Hold current positions to expiry | Baseline comparison | | **Roll Up** | Buy back current call, sell higher strike | Stock has risen, want to release upside | | **Roll Down** | Buy back current call, sell lower strike | Stock has dropped, want more premium | | **Close Position** | Buy back call, hold stock naked | Want full upside flexibility | | **Mixed Roll** | Roll some calls, keep others | Diversified approach | ### Step 3: Calculate Net Premium for Each Strategy This is the critical calculation most people get wrong: ``` Net Premium = (All premiums received historically) - (Costs to buy back/roll current positions) + (Premiums from new positions sold) ``` **Roll Up reduces net premium.** This is the true cost — not the debit paid, but the reduction in downside cushion. ### Step 4: Build Scenario Matrix For each strategy, calculate total P&L at key price points: **Required price points:** 1. Deep downside (-30% from current) 2. Moderate downside (-15%) 3. Current price 4. Each strike price 5. Moderate upside (+15%) 6. Significant upside (+30%) **For each cell:** ``` Total P&L = Stock P&L + Net Premium + Assignment Income (if ITM) ``` Where: - Stock P&L = (Sell Price - Cost Basis) × Shares - If call ITM at expiry: Sell Price = Strike Price (for assigned shares) - If call OTM at expiry: Sell Price = Market Price (for unassigned shares) ### Step 5: Identify Optimal Strategy by Outlook | Market Outlook | Recommended Strategy | Reasoning | |---------------|---------------------|-----------| | Strongly bearish | Do Nothing or Roll Down | Preserve maximum premium cushion | | Slightly bearish | Do Nothing | Premium cushion > upside release value | | Neutral (near strike) | Do Nothing or Partial Roll | Premium cushion roughly equals upside release | | Slightly bullish | Roll 1 call (partial) | Release some upside, keep some cushion | | Strongly bullish | Full Roll Up or Close | Upside release value > premium cushion loss | ### Step 6: Present Decision Framework Never recommend a single strategy. Present the trade-off: **Roll Up = Spending premium cushion to buy upside space** Quantify this trade explicitly: - Cost in premium cushion: $X - Upside space released: $Y per share - Break-even stock price where Roll Up becomes superior: $Z ## Common Pitfalls (Lessons Learned) These are real errors made during live analysis — do not repeat: ### Pitfall 1: Mistaking Cap for Floor > "The $580 call provides downside protection at $580" **WRONG.** The $580 call means if stock > $580, your shares get called away at $580. If stock < $580, the call expires worthless and you bear full downside. ### Pitfall 2: Ignoring Net Premium Impact > "Roll Up costs $9,600 but releases $24,000 upside" The $9,600 reduces your net premium cushion. In downside scenarios, you're $9,600 worse off than doing nothing. The "released upside" only materializes if the stock actually rises. ### Pitfall 3: Forgetting Assignment Mechanics > "If stock drops to $400, the $580 call gets assigned" **WRONG.** Call buyers only exercise when it's profitable — i.e., when stock price > strike. Deep ITM calls get assigned. Deep OTM calls expire worthless. ### Pitfall 4: Asymmetric Position Sizing > "Roll 1 call to $820, keep 1 at $580" Check: after the roll, how many shares are free? The answer is always zero in a fully covered position. Each short call covers exactly 100 shares. There are no "free shares" unless you deliberately close a call without selling a new one. ### Pitfall 5: Static Analysis Only Covered call decisions are path-dependent. Today's optimal strategy may need adjustment in 2 months. Always specify: - **Monitoring triggers**: At what stock price should the strategy be re-evaluated? - **Next action**: What to do if the stock reaches the new strike? ## Advanced Scenarios For complex multi-call positions with different strikes and cost bases, see [references/multi-strike-model.md](references/multi-strike-model.md). For Roll Up/Roll Down decision frameworks with quantitative thresholds, see [references/roll-decision.md](references/roll-decision.md).


Security scan verdicts — ClawScan: clean | static analysis: clean | VirusTotal: clean | SkillSpector: clean (LOW)