I have a question about writing covered calls, while short-selling the stock as a hedge to your position
Basically, If you were to simultaneously:
a) Buy 1,000 BHP at $30
b) Sell 1,000 BHP at $30 using CFDs.
c) Write 1 covered call contract at say $32 strike with a 1 month expiry and collect a $2.38 premium
Wouldn't this hedge your physical stock you bought at $30, and allow you to collect the premium of $2,380 ?
You would have to set a stop-loss on the CFD hedge, at your break-even point (ignoring brokerage) of $34.38
I guess the only problem is if your CFD position gets stopped out and you don't get exercised....then the stock price could plummet under $30 and you make an unrealised capital loss on your shares as well as what you lost on the CFD's..........
Does anyone have a suggestion, using CFD's or other derivatives, for how you could:
a) Generate income selling options
b) Hedge any risk of a capital loss
c) Have a worst-case situation of breaking even (forgetting brokerage)