Questions tagged [call-options]

This tag is to be used for any question on call-options. i.e. an agreement or right to buy a stock or commodity at a specific price. Related tags [put-options, options, options-assignment, option-exercise] should be used when appropriate.

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56 views

How do I know what option on a particular stock X will move the most?

Say for instance I have a view that MSFT in the coming 3 months is going to come out with a big upgrade to their full year guidance. Let's assume in the event that this happens the stock goes up a lot ...
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2answers
57 views

How Implied Volatility affect Options Pricing

TSLA between 23 and 24 October 2019 had their earnings report. TSLA mark price on 23 October was 252$. On 24 October, half an hour after market open reached 297$. as we saw around 44$ push. if ...
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283 views

Can you buy an option and immediately exercise it? Options delays questions

Assuming American Options Can you buy a stock option and immediately exercise it - or are you only formally given control of the option at the end of the trading day? Would you be able to sell it ...
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2answers
200 views

Can a broker buy shares to cover naked calls without notifying me?

I sold some in-the-money naked calls, and found out the next day that the broker bought the underlying shares to cover the calls. They claimed that the underlying is hard-to-borrow and since the ...
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1answer
52 views

What is the effect of a short stock position on the value of an option?

I'm reading the book "Option Volatility and Pricing" by Natenberg and there is a paragraph I'm having trouble understanding. Chapter 7 (Risk Measurement 1), Page 98, Paragraph 2: The value of a ...
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1answer
68 views

How does this “cont callable,” “make whole calls” bond work?

I was looking at this bond on TD Ameritrade: This is a callable bond, so I'm wondering how that works, exactly. TD Ameritrade says that this bond is "cont callable," which I assume is an ...
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2answers
400 views

Selling options below bid on Robinhood

If you sell an option for cheaper than what is someone willing to pay, does Robinhood sell it for the best price or for the price you chose to sell it? I'm trying to figure out if I can do stop loss ...
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1answer
1k views

Robinhood doesn't allow you to exercise call options in the app?

On the Robinhood website, https://support.robinhood.com/hc/en-us/articles/360001331403, the following is written about exercising stock options: Can I exercise my call before expiration? Yes. ...
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1answer
654 views

Options basics: How to realize profit from a long call position

I'm studying the basics of options trading and just read a 'crash course' book where the author states the following: ...you won't walk away from a call option with cash in hand. The profit we ...
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4answers
246 views

Trying to get my head around how options work

A stock X is trading at $215. I bought a put at a strike price $195 for $2.55 premium(paid $255) expiring June 7. Today the stock is down by $15 to $200. However, the price of my put is reduced from $...
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43 views

Currency option case

I am a bit lost with understanding the naming used for holding positions in the currency options and their payoffs. If I want to buy the European option with an amount of x USD (EUR put/ USD call), ...
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3answers
198 views

How to buy a contract for S&P 500 index?

I am researching writing covered calls on S&P500 index. So in order to sell covered call I need to buy a contract for S&P500 index. I've never traded indexes. What exactly I will be buying (...
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2answers
139 views

Delta of a Vertical Spread | Slower than delta of long option?

People often prefer to trade options spreads rather than buying options, since those reduce your cost and have a defined profit and loss but what is the probability of success of a spread? For example ...
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2answers
149 views

Option trading for dummies

If I buy a $200 call option for $22 ($0.22) that expires in 3 weeks, with a current share price of $140, can I sell the option two weeks from now if the share price has reached $180? I'm asking ...
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3answers
163 views

The math of this Investopedia article

I'm a little confused on how this article comes up with $650 instead of $700. From Investopedia. Consider the following example: XYZ is currently trading at $99.00 You own one XYZ Oct 90 ...
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3answers
203 views

Why would anyone ever buy these call options?

I'm starting to learn the ins-and-outs of options. For the time being, I'm only interested in selling call options of index funds. Browsing through the available options in Robinhood for the ETF IVV (...
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4answers
188 views

What fundamental value do Options give the economy?

I had been wondering lately what the economic value that financial Options (Calls, Puts, American, Bermudan, etc) give to the economy is. In essence, what good do they give us, vs. simply trading the ...
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1answer
247 views

Difference between deltas of American vs European Call options

Is there a difference in the value of Delta of American and European options with the same underlying asset price, strike price, time to maturity? Also, is there any way to determine the price of an ...
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3answers
160 views

Starting with options trading

I am a regular trader with stocks but I am a complete beginner with options. I am referring to a few online resources like here and here However, I have a few questions. Say I call a stock at $50 ...
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3answers
265 views

Why not sell a call option with strike price below stock price?

Learning a bit about options. Can anyone explain to me why this is a bad idea or wouldn't work? Assuming example stock XYX with current price of $5.10, with calls selling for $.50 at a strike price ...
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1answer
786 views

“Break even” price on call options is lower than current stock price?

I am using the Robinhood app and see call options with breakeven prices below the current stock price. Is there a reason why you wouldn't just buy this option and then sell it off immediately ...
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111 views

What kind of stock option (European, American, exotic) is more popular? [closed]

I would like to know whether investors tend to prefer European, American, or exotic (aggregation of several options) stock options, either put or call. I also would like to get an idea of the relative ...
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1answer
29 views

Present value of exercise price & call-put parity

Call-put parity looks as follows: [value of call] + [PV of exercise price] = [value of put] + [share price] *from Brealey, Myers, Allen "Principles of corporate finance" Take an example: share ...
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1answer
165 views

Approach to roll down a Covered Call

If I sell a covered call and the stock declines some time before expiry, what would be a strategic approach to roll down the call to protect the downside, or are there any other approach to do it? Do ...
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1answer
794 views

Deep in the money Covered Calls with high premiums

Take a look at following option chain, it's for some company in Indian markets, I intend to do a covered call on the stock but I would want a little extra downside protection at the cost of little ...
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1answer
381 views

Long term option sell short term options against it

Company A is currently trading at $100. I bought 10 calls at a $110 strike price which expire in six months. What would be the best strategy (risk to reward) to buy or sell monthly options against ...
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2answers
112 views

Understanding the technicalities in options (put example)

My goal is to use options on a speculations level. I'm a bit perplexed with what I see on the broker account and thought this will be a good place to post my questions. So, here a fake-scenario (...
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2answers
477 views

Why doesn't cumulative call open interest and cumulative put open interest inform future stock directionality?

For example, how come the ratio of total puts and calls doesn't accurately inform of the stock's future movement?
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2answers
119 views

What would happen if you suddenly entered a large buy to open position that exceeded the total combined existing open interest?

For example, suppose you are very bullish on a stock and you wanted to purchase the maximum amount of call options. Let's say the current total call open interest is 50,000 and you purchased 100,000 ...
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2answers
176 views

does naked call option assignment result in stock borrowing fees?

If I write a naked call option which gets exercised early, will I have a chance to purchase the stock to cover the call or will I already owe a stock borrow fee by the time I am notified of the ...
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3answers
131 views

Why would a long term option contract that's “in the money” trade at exactly the difference between strike and stock price?

A stock currently trades at $70.05 has the following option contract: 3/1/2019 $44 call The bid of this call is $26.05 which is the call's intrinsic value (the difference between $70.05 and $44.00)...
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1answer
3k views

Robinhood covered calls

If i buy 1 call option and then sell 1 call option. Is that classified as covered? I don't actually own the shares, i just own an option to buy them. Robinhood allows me to do this even though i dont ...
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4answers
8k views

My out-of-the-money call options are near expiration and won't sell in the open market. What are my choices?

I had attempted to sell my contracts off today but was unsuccessful. They are currently OTM options and will expire tomorrow. What can I do to minimize loss and why was I unable to sell?
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2answers
53 views

Bull call spread

My textbook says the following for a bull call spread. "In the bull call spread, you sell a call with a lower strike price and buy a a call with a higher strike price. The call spread is a credit ...
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2answers
367 views

Massive Deep Out of the Money Call Option Transaction

I am relatively new to options, however something has caught my eye. I see this case of a single leg deep out of money HES Aug 10 call option with a very large transaction of 4,373 contracts completed ...
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1answer
323 views

Indications of Buy or Sell to Open — Time and Sales Window

I am using Thinkorswim trading platform and came across something I do not understand. The options chain is as seen below with 10 open interest and volume of 315 at strike 55, (added: bid ask spread: ...
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3answers
313 views

Why does increased volatility always mean higher call prices?

I understand that apparently implied volatility of a call option increases as the underlying price of the stock deviates further and further from the moving average. That mostly makes sense, because ...
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1answer
3k views

Understanding on closing an option

I have read that there are three scenarios when it comes to closing an option: You can buy or sell to “close” the position prior to expiration. The options expire out-of-the-money and worthless, so ...
2
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2answers
61 views

Do knock-out call options become worthless when the underlying stock is split?

Suppose you own KO call options based on a stock. The knock-out level would be at $90, the stock currently is at $100. But then the stock is split 1:2, so suddenly the stock is worth $50. Do the ...
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1answer
138 views

Selling Covered Calls, will online broker sell shares automatically?

Let's say I own a share of a company at $100, and I sell a call option for this company for $5 with a 6 month expiration, and a strike price of $110 (all arbitrary numbers). If the share price rises ...
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5answers
5k views

Can I buy an out-of-the-money call and then sell it before it reaches the strike price?

I'm new to options trading so if this question does not make sense or is stupidly easy please bear with me. I'll try to show my thought process through an example. XYZ is currently trading at $100. ...
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4answers
14k views

Trading Options (Call on Robinhood App)

In the attached image you will see the Robinhood app shows that if I purchase the Call I will "have the right" to "purchase" 100 shares. Does this mean I have to have the funds to purchase the 100 ...
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4answers
3k views

Why is XYZ $70.5 strike call more expensive than $68 strike call?

The link below shows the February 16 call option listing for company XYZ. I used to think that, the higher the strike price, the cheaper the call option. Obviously, the price pattern for this ...
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3answers
838 views

Wouldn't it always make sense to be an Option Writer (seller)?

I've read multiple times that options are rarely, if ever, exercised, and 90+% usually expire into nothingness. If that's the case, wouldn't you always want to be an option writer? If nobody is ever ...
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1answer
465 views

Hedging a long/short equity position with options?

If an individual was considering: LONG 100 AAPL shares at 150 SHORT 100 APPL shares at 150 How could he/she hedge the directional risk with options for those two trades? And what would be the ...
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2answers
174 views

How can an option seller get out of a contract?

I was recently on Optional Alpha, which provides an overview of how to trade options, from A to Z. During one of the videos/lectures, there was an introduction for: buy to open, sell to close, sell ...
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3answers
175 views

Confusion about trading options

There is one thing I do not get about trading options (let's restrict this to calls), and no online resource I've come across seems to talk about the following scenario. There are 3 parties in this: A,...
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2answers
440 views

Stock options: payoff diagrams assume European style exercising

Most literature on stock option strategies expresses payoff outcomes in terms of European options -- namely, ones that can only be exercised on the expiration date. See this Iron Condor payoff ...
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3answers
281 views

Options “Collar” strategy vs regular Profit/Loss stops

I just found out about the option "collar" strategy which is implemented with a long put and a short call. My understanding is that a collar limits the profit as well as the loss on the underlying ...
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1answer
180 views

fair price of call option in this problem

The price of an asset can move to only two values – USD 102 and USD 98 – over the next month. The probability of a price rise is 99%, while the probability of a fall is 1%. The annual simple risk-free ...