Covered Call Strategies On CIBC Investor's Edge

Introduction

This tutorial provides a step-by-step guide on rolling covered calls using the CIBC Investor's Edge platform. Covered call strategies can enhance your options trading approach, allowing you to generate income while managing risk. This guide is suitable for both beginners and seasoned investors interested in maximizing returns in tax-advantaged accounts like TFSAs, RRSPs, and Roth IRAs.

Step 1: Understand Covered Calls

Before diving into the process, it's essential to grasp what a covered call is:

• A covered call involves holding a stock and selling call options against it.
• This strategy generates income from the option premiums while allowing you to potentially sell the stock at a profit.

Practical Tip: Ensure you own the underlying stock you plan to write calls on. This is crucial to avoid being assigned unexpectedly.

Step 2: Review Your Stock Holdings

• Analyze your current stock portfolio to identify which stocks are suitable for covered calls.
• Look at the recent performance and consider market conditions that may affect your chosen stocks.

Common Pitfall: Avoid selecting stocks with high volatility if you are risk-averse. Steady stocks are generally better for covered calls.

Step 3: Navigate CIBC Investor's Edge

• Log into your CIBC Investor’s Edge account.
• Familiarize yourself with the platform’s layout, focusing on the options trading section.

Practical Tip: Take time to explore the educational resources provided by CIBC for better understanding.

Step 4: Execute Rolling Covered Calls

1. Identify the Call Option:

   • Find the call options for the stock you hold. Look for options with an expiration date that aligns with your trading goals.

2. Select the Strike Price:

   • Choose a strike price that reflects your desired balance between risk and reward. Consider selling calls slightly above the current stock price.

3. Enter the Order:

   • Enter the order to sell the call option, specifying the quantity and expiration date.

4. Review the Order:

   • Double-check all details to ensure accuracy before submitting your order.

Step 5: Confirm Your Order Before Submitting

• Review the confirmation screen carefully:
  • Ensure the stock symbol, option type, strike price, and expiration date are correct.
  • Check the premium you will collect for selling the call.

Practical Tip: If you're new to options, consider practicing with smaller amounts to build confidence.

Step 6: Adjust Open Orders

• If market conditions change or if you want to modify your strategy, you can adjust an open order:
  • Go to the open orders section in your account.
  • Select the order you wish to modify.
  • Change the parameters as necessary and confirm your adjustments.

Common Pitfall: Be aware of potential fees when modifying orders. Always check CIBC's fee schedule.

Step 7: Get Trade Alerts

• To stay informed about market changes, subscribe to trade alerts from CIBC or other investment newsletters.
• This will help you react promptly to market opportunities and risks.

Conclusion

Rolling covered calls is an effective strategy to enhance your income while managing risk. By following the steps outlined in this guide, you can leverage the CIBC Investor's Edge platform to execute this strategy effectively. Remember to review your stock holdings regularly, adjust your orders as needed, and stay informed through trade alerts. As you gain experience, you can refine your approach and potentially increase your returns. Happy trading!