Buy-Write Strategy

A buy-write combines purchasing stock and selling a covered call in a single trade.

How Buy-Write Works

Instead of two separate orders:

  • Buy 100 shares
  • Sell call option

    • You execute one combined order:

  • Buy-write order at net debit

    • Benefits of Buy-Write

  • Single execution - One order, one fill
  • Better fills - Market makers like combined orders
  • Reduced slippage - Less market impact
  • Clear entry - Know your net cost immediately

    • Calculating Buy-Write Price

    Net Debit = Stock Price - Call Premium

    Example:

  • AAPL at $230
  • Sell $240 call at $4
  • Buy-write net debit: $226

    • Your effective cost basis: $226 per share

    When to Use Buy-Write

  • Starting new position - Want exposure + income
  • Deploying cash - Have capital to put to work
  • Tax lots - Create specific cost basis
  • Better execution - Brokers often give price improvement

    • Order Entry

    Most brokers offer buy-write as order type:

  • Fidelity: "Buy/Write" order
  • Schwab: Combined order
  • Interactive Brokers: Combo order