Targeting a Stock Sale Price
Example: You own XYZ stock which is trading at $48.50
Outlook: You are neutral to moderately bullish on XYZ stock over the next few weeks and are looking to sell your stock at $50.
Possible strategy: Sell one 30 day XYZ 50 strike call at $1.75
- Effective Sale Price = Stock Sale Price + Call Premium Received
- $51.75 = $50 + $1.75
- Breakeven = Stock Price - Call Premium
- $46.75 = $48.50 - $1.75
- Maximum Loss = Significant on the downside with stock ownership
In Summary: You may consider selling an out of the money call option on a share for share basis to target a sale price for your stock. By selling a call option against your stock you may be able to enhance your return as opposed to selling your stock outright.