##### The Best Covered Call Strike Price...
1. % Downside Protection - the % the stock can decline before you lose money in the CC position
2. % if Unchanged - the % return or interest you receive from the premium on the option you wrote, if the stock price does not change
3. % if Assigned - the % return or interest you receive from the premium on the option written plus any gain from stock appreciation, if the stock is higher than the strike price when the option expires
4. % Probability - the calculated probability or odds that the stock price will be above the Strike Price at option expiration
###### If we look at a typical option chain for a stock, the following observation can be made in regard to the covered call strike price:
• As the strike price increases, the covered call option premium declines
• As the strike price increases, % Downside protection declines
• % if Unchanged is highest for options AT the stock price or at-the-money (ATM)
• % if Assigned increases with higher strike prices, which means the stock, must rise above the strike price to achieve this % return
 Simplified Apple Inc. (AAPL) @ \$92.79 chain with 32 days to expiration: Strike Price Option Premium % Downside Protection % if Unchanged % if Assigned % Probability Above \$90 \$4.20 4.5 1.5 1.5 66.7 \$93 \$2.42 2.6 2.6 2.9 48.6 \$96 \$1.20 1.3 1.3 4.8 30.1

###### If the investor is very bullish on AAPL, he may want to write the \$96 strike price. It pays a smaller premium, but there is the possibility of making some capital appreciation if AAPL should rise in stock price. If AAPL went over \$96 the option premium would bring in \$1.20 and capital appreciation would bring in \$3.00 more and the % if assigned return would be 4.8%. However, there is only a 30% chance that the stock will rise to \$96. And if the stock actually declined, there would only be \$1.20 of option premium to protect or insure the downside. The downside is only protected from a 1.3% decline in Apple's stock price. Therefore, the \$96 strike price is best suited for the investor that is optimistic about Apple's stock rise and is willing to sacrifice the premium for the possibility of a stock advance and wants a low probability that AAPL will be assigned (sold). The last case is the \$90 strike price, which is \$3 in-the-money (ITM). Who would want to write the lower covered call strike price? Well, if an investor was concerned that the price of AAPL would decline, then the \$90 strike price offers the highest premium of \$4.20 and has the highest downside protection to protect as much as a 4.5% decline in the price of AAPL stock. This extra protection comes at the cost of a lower % if Assigned and the probability of being assigned is the highest of the 3 strike price alternatives at 66.7%. The lower strike price alternative is best suited for the conservative investor that is concerned about a decline in the stock and may want to liquidate for a little extra premium rather than at the present market price. In summary, we can see that the best covered call strike price when writing a covered call is the one that meets your goals, as measured using the 4 calculated returns:
• \$90 Strike (ITM) safest with highest % Downside Protection with highest % Probability of assignment with no chance of stock appreciation.
• \$93 Strike (ATM) for the highest option income and % if Unchanged with no chance of stock appreciation.
• \$96 Strike (OTM) for the increased chance of capital appreciation with the highest % if Assigned and lowest % Probability of assignment.