Did You Know
- SMSFs are growing at the rate of around 2,600 new funds each month
- There are now 500,000 plus self-managed super funds in Australia
- 31 per cent of all super now sits within an SMSF – the largest segment of the super industry
- There are now almost one million SMSF trustees in Australia
- 3,000 to 3,500 new SMSF trustees are created each month
- A further 1.4 million people plan to start their own fund within the next three years
Self-managed super funds looking to boost their income potential and protect their portfolios from volatile share markets are increasingly turning to derivative strategies.
A covered call, for instance, involves the SMSF using a derivative in the form of a call option over a stock it already owns. The strategy involves holding the stock and writing a call option with a higher strike price – and receiving a premium for doing so.
Out of the ws-assets of the 460,000 SMSFs in operation, about $730 million was invested in derivatives as of the June 2011 quarter – nearly 10 per cent more than the $665 million the year before, according to the Australian Taxation Office’s statistics.
Listed shares were by far the most popular asset choice among SMSFs, with $139 billion invested as of the June quarter .
The Buy Write is an options investment strategy in which an investor simultaneously buys shares and writes a call option contract over an equivalent number of shares. If the shares are already held from a previous purchase, it is commonly referred to as covered call writing. Buy Write is the most basic and widely used options investment strategy, combining the flexibility of listed options with share ownership.
The strategy of buying shares and writing options is eligible within Self Managed Superannuation Funds (SMSFs), provided it is allowed for in the Fund’s investment strategy.*
History tells us that writing covered calls over shares that you hold out performs just holding shares alone.*
If you already own shares then arguably your risk does not change if you write an option over those shares. Only two outcomes can happen:
- The covered call option contract expires worthless and you retain the shares, or
- The contract is exercised and the shares are sold for the price agreed in the contract.
My Covered Calls and ProWriter software shows you which options have the best returns. Other information in the reports includes:
- Share price
- Last option trade
- Expiry month & date
- Strike Price
- ASX Fair Price
- Contract size
- Open Interest
- Non-Exercised Profit [at the money, in the money and out of the money]
- Exercised Profit [at the money, in the money and out of the money]
The above information is regularly updated in the reports during market hours. The reports are accessible 24/7The information is used to develop a trading plan showing you the outcomes of every option trade
My Covered Calls is like having a covered call calculator that has a direct feed of live data from the ASX. The reports are automatically updated and the % profit calculated and instantly displayed for exercised or not exercised outcomes. This lets you to easily identify those options with 2.5% or better returns exercised or not-exercised. See for yourself.