Over the past few weeks, we've discussed Covered Calls, which are regarded by many professional investors as one of the most powerful investment strategies available. But what if you don‘t want to or can't write calls against the shares you own, or don't own shares, but have other investments? What are your options?
Margin requirements for writing Covered Calls
When you write a Covered Call, you must lodge your shares with the Option Clearing House (OCH) as margin. This step is required to ensure that if you are exercised your shares are immediately available to be sold.
As you are offering the shares as security, no further margin is required.
There is a second method whereby someone who owns shares may use those shares as collateral for the purpose of writing options. The OCH will assign collateral value to shares that have been lodged as security, this system works in the following manner:
The OCH has established three tiers of shares acceptable to be lodged as security:
Tier One Any share that has exchange traded options may be lodged as collateral. For example, you could lodge NCP shares for the purpose of writing BHP options.
Tier Two Is any share or units in entities within the ASX Fifty Leaders which do not fall within the shares listed in Tier One.
Tier Three Is any exchange traded security of Tier One shares, other than fully paid ordinary shares that meet the following criteria: Issued capital represented by the securities must be a minimum of $100 million, the minimum monthly volume must be in excess of 100,000 units and the minimum closing price must be at least $0.50.
In defining how much the collateral you have lodged is worth, the OCH applies a 30% discount to the market value of your shares.
The purpose of applying a discount is to guard against a sudden change in the market value of your shares. Such a treatment provides both you and the OCH with a buffer against unexpected market volatility.
Collateral must be lodged with the OCH by 4 pm of the day in which the trade is initiated. So if you put a trade into the market in the morning you must lodge your collateral by 4 pm on the same day. If you do not, the OCH will treat it as an uncovered position and full margins are payable in cash by 11 am on the following morning.
As well as taking shares as security, the OCH will accept a range of other financial instrument such as bank guarantees, certificates of deposit and non bank bills of exchange.
Let's start trading!
Before dealing in the options market, you must complete and lodge the OCH Client Agreement Form.
This document outlines that you are aware of the mechanics of the options market, understand its risks and accept to be bound by its requirements. OCH forms are available from your broker and are usually included in the account opening packs which they will provide.
The options market also has slightly different settlement requirements to those associated with dealing in equities (shares). Settlement on options is required within 24 hours, or T+1. (Equity settlements are required within 3 business days, T+3).
Therefore, when you write covered calls, your account will be credited with the premium payment the next business day.
If you ever choose to take (buy) a Call or Put option contract(s), then most brokers will insist on a cash balance being established in your account before agreeing to enter the market on your behalf.
I Don T Understand Song
While planning a wedding can leave one harrowed by ?the big day,? there are some strategies both brides and grooms can use to make events go as smoothly as possible. Common sense needs to rule the day no matter what goes wrong; and rest assured, all won't go exactly as planned. If both brides and grooms are on board with making the wedding day go as smoothly as possible, even the mishaps can be seen as favorite memories in the days and years to come.
In most situations, brides have planned most of the wedding. This fact does not mean, however, that the groom can just sit back and watch while the bride works herself into a frenzy by the wedding day.
If you as a groom do not know what to do to help, just ask! Ask your bride for a list of things that you can do to help her. If she says she'll handle it all herself, it may be time to put in a call to her mother. Those extra brownie points never hurt, anyway. If you are the recipient of a to-do list, just do it! Even if the items don't seem important to you, complete the list in its entirety, on time.
If we look at the traditional role for the groom in planning a wedding, we'll see that the groom is usually responsible for planning the honeymoon. If this is the case for you, make sure to confirm every single reservation you have made for the trip. For more tips on honeymoon planning, be sure to check out www.travelblogger.info.
The day before the wedding, make sure to pack everything you need for the ceremony, reception, and honeymoon. If you don't know what you need, ask for help. If the bride is too busy, ask a female friend or your own mother. Everything needs to be done before the day of the wedding. If nothing else, it will start you marriage out on the right foot!
An important responsibility for the groom before the wedding is purchasing a gift for your bride. Make sure this gift, along with the ring and all honeymoon documents, is packed in a secure place. Write the location down on your hand if you have to, just don't forget where you put these necessities.
During the rehearsal dinner, make sure you give a toast to your future in-laws. Again, the brownie points! Tell them how wonderful they must be in order to raise such a wonderful daughter, etc. Don't forget your own parents in the toast either. Be sure to thank them for all they've done for you.
A key point of advice is to severely limit, if not curtail all together, consuming alcoholic beverages the day before and the day of the wedding. Being respectful to your bride, family, and guests is extremely important. You don't want your guests feeling sorry for your bride for marrying an inconsiderate lush!
On the day of the wedding, be to the church exactly as scheduled. Photographers usually start taking pictures two hours before the ceremony. The photographer will photograph the bride for about 45 minutes and the groom for about 30 minutes. Even if you think you'll just be sitting around (which may happen), be there on time anyway. Now would be a good time to get in a last game of poker with your buddies before getting married if you find yourself with nothing to do.
Truly, the groom's responsibilities for the week of the wedding can be summed up in one word: courtesy. Show courtesy to your bride by being available to assist her any way you can. Show courtesy to your family by remembering them in toasts. Show courtesy to your guests by being on your best behavior. Finally, show courtesy to yourself. You will have to live with every decision you make during the week and day of your wedding. Be the kind of person you would want your daughter to marry some day.
Both Daniel Kertcher & Pepper Montero are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Pepper Montero has sinced written about articles on various topics from Wedding Bells, Gym and Finances. Pepper and her husband run a wedding coordination business in the Upstate of South Carolina. They have been coordinating weddings for the last two years. This article may be reprinted freely as long as all links remain active. http://www.bridalblog.info h. Pepper Montero's top article generates over 1600 views. to your Favourites.
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