Strategies · Library · Options
§2.2Carry
Covered call
Own the shares and sell a call above today's price, banking the premium. Suits a flat to mildly up view; upside is capped at the strike, downside is the stock's fall less the premium.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Options
- Held for
- To expiry
- Data
- ARCANE has part of the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Neutral to mildly bullish on the stock; expects a modest rise or sideways trading, with implied volatility rich enough to be worth selling.
- Entry and exit
- Buy shares (or already hold them), sell one out-of-the-money call per 100 shares for the chosen expiry. At expiry let it lapse or be called away, then sell the next call; roll or buy back if the stock runs through the strike.
- Sizing
- 1:1 (one short call per 100 shares)
How it fails
- Gain stops at the call strike, so a strong rally is missed
- Full stock downside remains, cushioned only by the premium
- Shares can be called away early; time decay helps the seller
- Same payoff shape as a sold put
Data it needs
- options chain with strikes and premiums
- underlying daily price
- dividends and borrow cost
ARCANE has the underlying daily close but no options chains, strikes or implied volatilities
How ARCANE uses it
Matches a Call that a stock or index finishes a period roughly flat to slightly higher, such as "SPY ends the month between flat and +2%". Paper only.
Builds as a long-only proxy. Holding the underlying approximates the stock leg; the sold call and its income cannot be built.
Filed under the carry card
Own what pays more than it costs to finance (the return if prices stand still) and sell what pays less, across currencies, bonds, commodities and stock indexes.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §2.2, p. 19 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.