Recently, writing covered calls on (NVAX), our fearless, intrepid investor lost some $70,000.00 in her “fun” portfolio! How much fun can that be?
She had done well writing covered calls on NVAX every Monday, most of the time with the strike price just out-of-the-money, expiry date Friday of the same week. Morningstar now rates NVAX as undervalued at an 18% discount.
Remember that the risk of writing covered calls entirely comes from the risk connected to the underlying security.
Given the undervaluation, should she:
a.) continue with the covered call writing strategy or
b.) buy more NVAX and wait for the market to make up for the lost ground or
c.) do both?
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