For a covered call(you own the stock) selling a option you have to own the stock.
There is other crazy options things people do which I don't get involved with, goldfinger may know more, but they can get very complicated.
If you sell you are normally betting that the stock will rise up the strike price but hopefully not over, that way you keep the gain and the options premium.
You can write a covered call and still make money on the sale if it does hit the strike price though.
My 105$ covered call I wrote for FCX, even if it hits, will still be profitable for me because I am in the shares an average of 95$.
Best case scenario is that it hits 104$ the day of the call. I keep the premium and then sell the shares the next day for a profit as well.
Of course, I just bought a call for 105$ strike in April...most likely I will just sell the option prior to expiration, as I think that will be about the top limit of FCX for that time.
4 comments:
For a covered call(you own the stock) selling a option you have to own the stock.
There is other crazy options things people do which I don't get involved with, goldfinger may know more, but they can get very complicated.
If you sell you are normally betting that the stock will rise up the strike price but hopefully not over, that way you keep the gain and the options premium.
mdp
Just bought FCX April call. 105$ strike price.
Going to write a covered call on my current FCX holdings. Same strike price for April.
mdp,
You can write a covered call and still make money on the sale if it does hit the strike price though.
My 105$ covered call I wrote for FCX, even if it hits, will still be profitable for me because I am in the shares an average of 95$.
Best case scenario is that it hits 104$ the day of the call. I keep the premium and then sell the shares the next day for a profit as well.
Of course, I just bought a call for 105$ strike in April...most likely I will just sell the option prior to expiration, as I think that will be about the top limit of FCX for that time.
True..my comment was kind of a cluster of thoughts...the third paragraph says basically what yousaid...need to type slower and think more..lol
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