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Now that we have given you the steps to create a Hedge Wrapper, let's go through an example. The stock you are going to use for this example is New Era Networks, Inc. (NEON). This example comes from the CallsAndPuts.com "Hedge Wrapper" data. Let's go through the procedures step-by-step. To summarize this option play:



1) You select NEON from the "June Hedge Wrappers" listing:



2) You didn't select the highest % return Premium, but selected NEON based on the criteria you've established for a good Hedge Wrapper candidate (This differs for each option investor based on risk versus reward criteria).

3) Let's assume you read the latest news on NEON and it is promising, but you want to make sure your downside is protected from any unanticipated stock price drop.

4) You access the Stock, Option, BB&RSI links and based on your risk versus reward criteria determine that NEON is your Hedge Wrapper investment choice.

5) Let's also assume that you have an account with ETrade and want to place your order for the stock purchase, CC write or option sell, and put purchase position.

6) Once you log into your account on www.etrade.com, access the Trading > Enter Stock Order link. 

7) Place your stock purchase order for 600 shares by selecting the following fields:

8) This purchase of NEON is for 600 shares at market price.  If you want to have your purchase execute at a specific stock price, select the "Limit" radial button and enter the price.  

9) Once your stock order is executed successfully (check your ETrade email status), choose the Trading > Enter Option Order link.

10) Place an order to write covered calls for your 600 shares by selecting "Sell Open" and enter 6 Contracts (remember, 1 contract = 100 shares).

11) You can select the "Market" radial button if you want the order to execute at any price as soon as the order hits the trading floor or select "Limit" if you want the covered call position to execute at a specific price.

12) If your CC position is assigned, the CC premium amount will be placed in your account within one business day. These funds then will be available for purchasing the put option contracts for downside protection which creates the Hedge Wrapper.

13) Place an order to purchase 6 contracts by selecting "Buy Open" with the put option symbol in the Option Symbol window. Use the Find Symbol link to ensure that you are selecting the correct put option symbol.

 

1. Covered Calls
2. Hedge Wrapper
3. Sell Naked Puts
4. Sell Naked Calls
5. Bull Put Spread
6. Bear Call Spread
7. Bull Call Spread
8. Bear Put Spread
9. Buy Calls
10. Buy Puts

CoveredCalls.com

Option Descriptions
1. Covered Calls
2. Hedge Wrapper
3. Sell Naked Puts
4. Sell Naked Calls
5. Bull Put Spread
6. Bear Call Spread
7. Bull Call Spread
8. Bear Put Spread
9. Buy Calls
10. Buy Puts
Option Examples
1. Covered Calls
2. Hedge Wrapper
3. Sell Naked Puts
4. Sell Naked Calls
5. Bull Put Spread
6. Bear Call Spread
7. Bull Call Spread
8. Bear Put Spread
9. Buy Calls
10. Buy Puts

Site Resources:

Bollinger Bands & RSI
How to Use Our Site
Characteristics and Risks of Standardized Options
Disclaimer
          
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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