Buy a long term Long Call option. Steps Make sure the trend is ascending or stagnating at a certain level.
Exit: When the share closes above the strike price, the Short Call will be exercised, the investor delivers the shares and receives the premiums.
If the share price is below the strike price but above the Stop Loss at expiration, then the Short Call option should be left to expire worthless and the received premium should be kept.
If the share price is below the Stop Loss at expiration then the Long Call option should be sold or the trader should start trading in opposite position. Basic characteristics Maximum loss: Limited. Cannot be more than the paid debit.
Time decay: Time decay has a mixed effect on the value. Advantages and disadvantages Income on a monthly basis. The potential return is larger than for a Covered Call strategy.
The investor can profit from share prices moving within given limits as well. Disadvantages: In case of increasing share prices, it has an upper limit. In case of large increase in share prices, it can generate losses. Mitigation of losses: Close the position the above-mentioned way.