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When I sell covered calls I see the balance that I was paid (the premium) represented as a negative number under the "options" section of my balances. Why? It makes sense to me that the premium would be assumed mine (not a debit or something I'm waiting on).

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  • Probably a question for your broker. I see a negative only when the cost of my short call has gone up since I sold it (because closing it will result in a loss).
    – Hart CO
    Aug 11, 2020 at 17:03
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    @HartCO Schwab as in the tags
    – HorseHair
    Aug 11, 2020 at 17:04
  • @Hart Co -If you own a security, it has a positive value which you realize when you sell the security. If you are short a security, it has a negative value which is eliminated when you buy the security to close. In an account page, There are 3 components: Market Price, Market Value of Position and P&L. If the price of a short call goes up, the call incurs a loss. That's P&L. However, the short call is a liability and that liability also becomes more negative as the call's price goes up (Market Value). Aug 11, 2020 at 17:33

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You are short the call. It is a liability that you must satisfy and therefore the Market Value is negative.

Here's an example that might be an easier way to understand it. You sell a call for $10. Assuming no commissions and fees, $1,000 is deposited into your account. Your cash balance increases by $1,000. Has you account value gone up by $1,000? No, because if the call's price is still $10, it's a $1,000 liability. That is how much it would cost for you to buy it back. Plus $1,000 and minus $1,000 equals zero and therefore your account value is unchanged.

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  • I own the stock though (the call is covered), and the premium is immediately mine, right?
    – HorseHair
    Aug 11, 2020 at 17:31
  • @HH- Apologize to Carole Baskin - Yes, the premium is yours, no matter what. Ignoring upside opportunity cost, your risk is if the stock's price drops more than the amount of the premium received. Aug 11, 2020 at 17:35
  • Bob - yeah that's how I understand it as well (but I don't mind if the stock drops, since I'm ok with holding it long term). It's just the negative balance on the broker's site that confuses me
    – HorseHair
    Aug 11, 2020 at 17:43
  • I bought the call Bob mentioned. I am long one contract, currently worth $1000. How would you think your acct would reflect your position? You are short that call, and since its value is $1000, it's -$1000 on your side. Aug 11, 2020 at 18:46

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