Selling call options when you own the stock,trading currencies\u002fhotels\u002ftulsa ok,binary options managed accounts,penny stock day trading - Plans Download

20.11.2014 admin
The covered call strategy involves owning or buying stock and selling an appropriate number of calls against it. The maximum gain is limited; the risk is the same as owning the stock (minus the credit for selling the calls).
If the sold call can be bought back for a small amount before expiration, it is usually best to do so, in order to lock in your profit and eliminate exposure to risk. If you are purchasing stock at the same time you are selling calls, this strategy loses if the stock price drops significantly because to exit a position, you will need to first buy back the call and then sell the stock.
Alternately, if the stock takes off and moves beyond the strike price sold, the position will not partake in those gains.
To reiterate, the covered call will profit from the stock's moving up, staying flat, or falling no more than the credit from the sold call.
In the circled area, INTC price bounces off resistance at the same time that implied volatility spikes.
Some people like to use ETFs (exchange traded funds) for covered calls to minimize risk, but that doesn't mean that there isn't any risk.
Here, in late July, we seemed to have the price bottoming out, with a spike in implied volatility. After a quick move in our direction, the price dives down to below 46 as the implied volatility increases almost 50%. We hold the position and stock is down around $46 at expiration, so we have a loss, but it is reduced by the amount of the credit of the sold call. In consideration of your time, we'll send the first two chapters of Jon and Pete's latest book, How We Trade Options.


All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual's trading does not guarantee future results or returns. You like it long term, but don't see it going anywhere over the short term and would consider selling it, given the right terms. They profit if the stock price drops by less than the amount of the sold call, and remain profitable if the stock moves up to or beyond the strike price of the call sold. We want to sell calls on high implied volatility because that is more time decay in our favor. So in this case it is usually best to wait for expiration and assignment, because buying back the call can be very expensive. The price breaks back above 48 as the implied volatility starts to fall, so we sell the August 49 call for $1.20. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities by OptionsHouse. After spending decades in the trading pits of Chicago, Jon 'DRJ' and Pete Najarian founded the company in 2005 to help people better manage their own investment portfolios. You would also like to generate some income, but you aren't interested in selling your stock only to buy a CD with a next-to-nothing return. But while selling the call brings income to the account, it creates the obligation to sell the stock if the call is assigned.
Meanwhile, if the stock goes to 50.30 at expiration, the call will be assigned and the stock sold. The credit from selling the call gives you small cushion, but not real downside protection.


If you are assigned, you will have to sell your stock, which can create tax issues (especially if you have held the stock for a long time). Because implied volatility (the volatility expectation taken from the options price) is a significant part of the premium paid for an option, if implied volatility goes down, the covered call will profit, and if implied volatility goes up, it will lose.
If we had waited, we would have had the $1 profit from the option and $1.50 from the rise in the stock price, a gain of more than 10% for the month (minus commissions and fees). If we decide that we want to get out of the entire position, then we need to first buy back the call, and then sell the stock. This should not be considered a solicitation to open an OptionsHouse account or to trade with OptionsHouse.
OptionsHouse does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular investment or investment strategy, and you shall be fully responsible for any investment decisions you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.
At that point, the full value of the sold call is retained while the stock has achieved its maximum without assignment. Otherwise we can wait until expiration if we think that the QQQQ will be back up above 46.80 (our break-even point) by expiration. You have a position with positive theta and so every day you are profiting from time decay (all else held equal).



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