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1
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1answer
153 views

Sell covered call on an index option

When I trade an index option (SPX), there is no actual trading going on in the underlying (as opposed to SPY). But some option strategies (like covered call) by definition require a position in the ...
0
votes
1answer
35 views

Why out of money options show no bid price but a valid ask price

Looking at the option chain for SPY I see that a lot of the out of the money calls are showing Bid as N/A. What is the reason? Nobody wants to buy out of the money calls because expiration is ...
1
vote
1answer
119 views

Why does shorting a call option have potential for unlimited loss?

Referring to http://en.wikipedia.org/wiki/Option_(finance), for a short call: If the stock price increases over the exercise price by more than the amount of the premium, the short will lose ...
-1
votes
1answer
42 views

What is the probabiltiy of being assigned if the call expires in the money

If I sell a call option and at expiry, the call is in the money, is it guaranteed that I will be assigned and will need to deliver the underlying? What is the probability of assignment/ My question ...
0
votes
0answers
32 views

Options contract calculator - for non-equities

All of my options calculators are within stock trading platforms, or readily found on the internet and require stock/index symbols. I am trading illiquid options over the counter, on an asset. I have ...
1
vote
1answer
58 views

Buying & Selling Call Options

So, I understand that if I write a call option and someone decides to exercise it before it expires, I agree to sell them the stock for the listed price on the option. I guess my confusion is, if I ...
1
vote
1answer
67 views

Can a Covered Call be called away before the expiration date?

Scenario: If I hold 100 shares of XYZ, I can sell 1 XYZ call. Let's say the current price of XYZ is $50. What if I sell a call with strike price $45? Does that mean the underlying owner can call away ...
1
vote
1answer
56 views

How do I calculate the return on my stock _call_ option, similar to my _put_ example?

I'm trying to figure out the effective percentage return when I write ("sell to open") a stock call option. I think I've figured it out for put options. Consider this put example I think XYZ stock ...
7
votes
3answers
1k views

Am I understanding buying options on stock correctly

I'm just wondering if I am understanding Stock options correctly. Basically if I am watching stock XYZ. It's currently at $10 per share which I believe is low and should raise to 20 within 1 month. ...
2
votes
3answers
59 views

Why does a long/purchased call option have a long position in the option itself?

I am teaching myself some finance through a book. And I get confused by call/put options having short/long position in the options themselves or the underlying assets. For example, I understand the ...
0
votes
1answer
48 views

Is there an equivalent of writing calls on personal real estate holdings

Where possible I like the ability to write calls on the underlying asset for the residual income in a low-medium volatility environment Is there the equivalent of doing this with real estate? I am ...
1
vote
1answer
26 views

Can a deeper ITM call be cheaper than a less deep ITM call for same expiry date

In this option chain for SPY Apr 25 calls the one with a strike of 170.50 has a lower price than the one with a strike of 171. But why is this? 170.50 call is deeper ITM than 171, so it should be ...
2
votes
1answer
43 views

Can I get an assignment notice as soon as I sell a covered call

If I sell an American style ITM covered call, then in theory, can I get an assignment notice as soon as I have sold the call, since the counterparty can opt for early exercise? Does this ever happen ...
1
vote
1answer
85 views

What does an options premium really mean?

I am taking a derivatives class at college, and I am getting slightly confused about how to understand options premiums. I have a couple of questions, specifically on this slide presented in class: ...
2
votes
1answer
247 views

Negative Balance from Automatic Options Exercise. What to do?

I have an account with ShareBuilder and recently purchased some call options, which ended up deep ITM (in the money). I attempted to close the options too close to when the market was about to close ...
5
votes
1answer
359 views

Options: Letting it expire or sell when profiting?

Do you let your options expire or would you sell it before you let it expire if you're profiting (meaning you're in the green - market is going towards the correct direction you anticipated). If you ...
0
votes
1answer
128 views

Put-Call parity - what is the difference between the two representations?

I have seen these two terms for put-call parity: S + P = C +Ke^(-rT) S + P = C + K/(1+r)^T Which one is the correct formula? When to use each of them? What is the diffrence?
-2
votes
1answer
148 views

What does this mean? SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT

can someone please explain what does this quote mean? SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT what is Vertical what is -10 what the 32/34 stands for? what is LMT
1
vote
1answer
110 views

Knockout certificate (Long) fell more than 6% even though the underlaying security rose 1.2%

I recently bought a knockout certificate for facebook. So far it has been doing great returning more then 200%. But recently it has been doing something really strange. On Friday Facebook rose 1.2% ...
3
votes
2answers
386 views

Can the purchaser of a stock call option cancel the contract?

Let's assume there's a company, XYZ, trading at $11/share today. I purchase a call option @ $15 for $0.05. Do I need to keep funds in my account to satisfy the contract? I know my counter party ...
1
vote
2answers
103 views

Can I convert spread option into regular call or put?

I have bought spread call on stock X. After that point, the stock went up and came back. My short position is the same price as it was when I bought it 1 month back. At this point If I just clear out ...
3
votes
3answers
269 views

What is the best way to make a bet that a certain stock will go up in the medium term?

If I want to make a $1000 bet that, say, a share of AAPL will be $1000 in a year's time, what's the best way to do that? AAPL is over $600 today, so with my $1000 I can only afford to buy one share. ...
3
votes
3answers
270 views

Options strategy - When stocks go opposite of your purchase?

I'm a bit new to options and would like to ask for someone's strategy opinion. Lets say that you buy a call at an expiration date 2 months or so from now, and in a few days you see the stock go flat ...
2
votes
2answers
3k views

Difference between Black-Scholes, Binomial models and Market price in European index options?

Need some help! I have calculated the theoretical price of an index option using BS and Binomial models and are now comparing the three. While BS and Binomial have approximately the same value, ...
2
votes
2answers
571 views

how do I calculate rate of return on call options that are spread

I want to do a leap spread on an existing covered call option. How do I calculate the rate of return to determine if it's worth doing the leap spread?
2
votes
2answers
4k views

Difference between European and American options

Appreciate some help with a problem i am facing OK, so first I found a put and call option with same strike price and maturity for both American-style and European-style options. I selected the ones ...
1
vote
1answer
75 views

How to buy options on a specific security?

I want to buy a few call options, in my 401(k), for a specific security. I'm aware of the risks inherent to option trading, and this will be a small part of my overall strategy. Here are my ...
4
votes
2answers
115 views

How it actually works? Selling a call on a stock I hold, but has done poor, might the market thinks may rise

I currently own a little over 500 shares of a stock which represent a hefty on-paper loss for me. I don't want to liquidate the position. I think that long term that stock may come back up as in the ...
2
votes
2answers
841 views

Do stock option prices predicate the underlying stock's movement?

I am trying to understand if my thinking is correct or not. I am looking at a stock that is @ $10.00. When I look at the options on the stock $11, $12... calls are all down today and $11, $12... ...
5
votes
1answer
301 views

Options for the intelligent but inexperienced

(Related to "Options for Dummies" and "What are some good options strategies...") I've been an investor in stocks for the past 14 years and have the confidence that I know what I'm doing. (Not that I ...
5
votes
2answers
250 views

Can a put option and call option be exercised for the same stock with different strike prices?

Refer to http://finance.yahoo.com/q/os?s=PEI&m=2011-10-21 If I were to sell a call @ 15 and sell a put @ 13, come October 21, is it possible for BOTH of the options sold to be exercised?
5
votes
1answer
75 views

Is the writer of a call ever required to surrender dividends to the call option buyer?

I was talking with an options trader that said he never writes calls on stocks that have dividends, because of various reasons. One of the reasons being that, under certain conditions, the writer of ...
7
votes
1answer
84 views

Premium classification when selling covered calls in a traditional IRA?

If I sell covered calls within a traditional IRA, then is the premium considered a contribution or a capital gain and can I withdraw that money?
3
votes
2answers
356 views

Calculating profits on a covered call. What method do you use?

Hey guys. I was having a discussion with someone about calculating profits on covered calls and I thought I'd ask the community's advice on which way is correct. I buy.... - 100 shares of XYZ at ...
4
votes
3answers
391 views

Covered calls: How to handle this trade?

I bought XNPT (Xenoport) a couple of weeks ago at 6.93 I turned right around and sold the Apr 16 call. $8.00 strike and collected 1.50 in premium. Today I get a great surprise that XNPT has rocketed ...
11
votes
4answers
308 views

Covered Call Writing - What affects the price of the options?

A little while ago, I bought $800 worth of stocks and sold about $200 worth in call options against the stock. I think it was 200 shares and 2 contracts (so my options weren't naked). That takes the ...
8
votes
2answers
2k views

What are the odds of being assigned for a long dated in-the-money call option?

If I sell a 2-year future dated call option that is slightly in the money (For example if Citi today is $5.13, I sell a call option for strike price $5.00 at Jan 2013 - today is Jan 2011), what are ...
4
votes
2answers
877 views

Brokerage Fees for Covered Call Options

I have been doing some research and am thinking of selling a Covered Call on a stock I currently own and am planning on holding long term. I would like to make an Out-of-the-Money Covered Call (OTM ...
29
votes
10answers
19k views

Options for dummies. Can you explain how puts & calls work, simply?

I never understood Puts or Calls. Could anybody explain it like I were a child?