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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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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
131 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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0answers
21 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
119 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
151 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
155 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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2answers
103 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
27 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
38 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
232 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
111 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
92 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
230 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
117 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
68 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
127 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
1k 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
7k 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
47 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
193 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
189 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
183 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
1k 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 ...
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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 ...
2
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1answer
97 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
4k 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
10k 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
406 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
285 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
156 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
152 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
314 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
197 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
153 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 ...
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2answers
497 views

Why doesn't someone choose the lowest Strike Price when choosing an CALL option?

When choosing a call option, there are usually a number of strike prices that are in-the-money. My understanding is if a buyer chooses the lowest strike price, he will pay a higher premium but the ...
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4answers
569 views

How do I hedge stock options like market makers do?

I understand what an option is and I know that a market maker always publishes a bid and an ask price for which it will buy or sell options on the exchange. Now I heard that market makers always hedge ...
3
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1answer
356 views

How exactly is implied volatility assigned to an option's strike price?

I'm trying to understand implied volatility (IV) better. Recently, I was looking at $YUMC's option chain (date: 07/10/2017) and in particular the 27.5 strike price with an IV of 0%. I'm trying my ...
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6answers
5k views

Why would someone want to sell call options?

I'm having trouble understanding why someone would want to sell call options. For example, if the writer of a call option owned the shares and they expected the share price to fall, why wouldn't they ...
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3answers
1k views

How to Calculate the Expected Move of a Stock

I've been trying to determine how to calculate the expected move of a stock, and I've found there are several ways to do this but most of my findings usually lead me to this formula: Unfortunately ...
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4answers
94 views

Selling To Close

Is it possible to sell to close a call/put option I own for a profit even if the underlying stock price has not exceeded the strike price? If my cost basis is .10 per contract and that same option is ...
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2answers
127 views

Price of a call option

Any explanation for why a call option would be priced so low per contract like the following example: Current stock price $3.90 / Call / Jul17 / Strike $2.50 / Ask .05 / Ask Size: 20 I've seen a few ...
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1answer
112 views

Is it possible to see option prices from the past?

For example, I can look up what a companies stock price was like in the past, but I can't look up an option chain from the past.
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1answer
286 views

Settlement of Shares Underlying a Covered Call Option

If I buy 100 shares of XYZ stock one or two minutes before selling one XYZ call option, would this call option be considered "covered", or would it be considered "uncovered" until the 100 shares ...
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4answers
2k views

At what time of day does time value fall off of a call option?

As days tick off of call options, time value decays. My question is does that happen automatically at 9:30AM at market open or does it get continuously deducted as the day ticks on?
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2answers
78 views

How are option contracts assigned?

If I'm short a call, and the contra exercises their option, how is that assignment tracked back to me? Is the other side of my contract tied to a specific buyer? How does the OCC know to assign my ...
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1answer
598 views

What does a high theta mean for an option position?

I have a Call Spread for a position in TSLA that has a theta of 15.67 with 43 days left till expiration. I can see that it's comprised of a 64.71 and a -49.04 theta. How can I best understand what it ...
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2answers
70 views

Borrowing share with a covered call for short?

I was wondering if I could increase the premium from my long term hold by providing them to my broker as a short sale stocks? My main question is that are there any implication on the fact that I ...
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2answers
86 views

When buying a call option, is the financial stability of the option writer relevant?

A call option allows a person to buy a stock at some future date for a specified price. By implication, if it is "in the money" you'll be able to buy the stock at a potentially deep discount. So it ...
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1answer
101 views

What is the skew of a volatility smile?

My book says that the skew of an implied volatility smile is the slope of the curve. But then it says that the skew is 0.25 %, i.e., if K goes DOWN 1, implied volatility goes UP 0.25 %. However, ...