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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39
votes
10answers
41k 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?
24
votes
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?
12
votes
4answers
698 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 ...
12
votes
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. ...
8
votes
2answers
4k 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 ...
7
votes
3answers
3k 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. ...
7
votes
4answers
3k 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?
5
votes
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 ...
5
votes
3answers
2k 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 ...
5
votes
2answers
1k 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
3answers
828 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
1answer
2k 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 ...
5
votes
2answers
441 views

How does this actually work? I want to sell a call on poorly performing stock I own but the market thinks might increase slightly in price

I currently own a little over 500 shares of a stock which represents a hefty on-paper loss for me. I don't want to liquidate the position. I think that long term, the stock may come back up as in the ...
5
votes
1answer
93 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 ...
5
votes
2answers
2k views

What happens to an options contract during an all stock acquisition?

Let's say for the sake of the question you're given the following scenario: Company BIG is trading at $10/share Company SML is trading at $40/share BIG reaches an agreement with SML for an all stock ...
4
votes
8answers
6k 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 ...
4
votes
4answers
1k 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 ...
4
votes
4answers
1k views

Why naked call writing is risky compare to Covered call?

I know that with a covered call you own the underlying and sell a call and with a naked call you don't own the underlying. Either way, if the underlying finishes in-the-money, you are assigned and ...
4
votes
8answers
22k views

Why does a call option's price increase with higher volatility?

As per the Black-Scholes model, the value of a call option is directly proportional to the volatility. Without getting into the derivation of the BS equation, is it possible to intuitively understand ...
4
votes
4answers
170 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 ...
4
votes
2answers
878 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 $7....
3
votes
2answers
6k 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 ...
3
votes
3answers
4k 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... ...
3
votes
2answers
5k views

How can I find ISIN numbers for stock options?

I currently use my bank for brokering services, as I don't have enough capital to justify going on my own. The bank told me that they need an ISIN if I want them to purchase stock (call)options for me....
3
votes
4answers
239 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 $...
3
votes
6answers
6k views

Exercising an option without paying for the underlying

As a follow up to my other question, I would like to know whether the following is possible: I have $20,000 in my brokerage account The price of the $300 call is $5.00 (1 contract = 100 shares) I buy ...
3
votes
2answers
1k views

How to sell a worthless option

I have a call option that will expire as worthless in January but I'd like to sell it now and realize the loss this year to lower this year's capital gains taxes. I would be happy to dump it at $0.00 ...
3
votes
3answers
671 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
1answer
489 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 ...
3
votes
4answers
195 views

Is there an academic framework for deciding when to sell in-the-money call options?

I've been buying 1-year at-the-money call options on various stocks as a way to increase my leverage. I almost never regret selling them once they are up 40%. There are many times when they've been ...
3
votes
1answer
129 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.
3
votes
2answers
9k 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, ...
3
votes
4answers
779 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 ...
2
votes
2answers
4k 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 ...
2
votes
3answers
151 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 ...
2
votes
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)...
2
votes
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
votes
2answers
434 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 ...
2
votes
2answers
11k 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 ...
2
votes
1answer
629 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 ...
2
votes
2answers
163 views

Total price of (AAPL option strike price + option cost) decreases with strike price. Why?

I'm looking at apple options and found this strange pricing in the options table. It seems like if you buy a lower strike price your total cost for buying the stock and options is much less. Why is ...
2
votes
1answer
695 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 ...
2
votes
3answers
265 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 ...
2
votes
3answers
561 views

Options profit calculation and cash settlement

I have a question regardnig call options. For example: 108-strike AAPL options expiring Dec 24th are 83 cents. That means the cost of one contract would be 83 + 5 (commission) = 89 dollars ...
2
votes
3answers
434 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 ...
2
votes
2answers
165 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 ...
2
votes
1answer
134 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 ...
2
votes
2answers
91 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 ...
2
votes
1answer
77 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 ...
2
votes
1answer
49 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 ...