covered call profit and loss question

[Took2Summit]

Quote from atticus:

You're tripping over your own bullshit. Start of the journal was nearly $24k, but you show a $22k balance on the last page. Then you produce a spreadsheet but the prior week's $22k isn't shown.

WTF are you talking about the prior week's 22k isn't shown? It is clearly shown as the week right before..it says 22,110.

Anyone reading this can very easily go to my journal, look at the picture, and see that the line item before the most recent week of 23,286 says 22,110. Which you are claiming isn't shown, all of your credibility just went out the window.

 

[atticus]

 

[Took2Summit]

Quote from atticus:

I assumed these were weekly totals, not fictional per trade stats. Here's some more fabricated numbers:

-8.51?

They are weekly totals, and the percentages are weekly percentage changes. the -8.51 represents -8.51% from the prior week, not from previous high or whatever it is you may be thinking it refers to.

 

[ForexForex]

Wow ........ It takes 62 posts to try and explain why the short call option position of a CC is in the red after the stock rises about 8% within days of selling the calls. And to make matters worst the OP is a regular with 1500+ posts.

Sad day for EliteTrader when these sort of threads are popular.

 

[1a2b3cppp]

How does number of posts directly relate to options knowledge?

You have more posts per day than the OP, shouldn't you be super smart? Yet you contribute nothing to this thread.

 

[ScalperJoe]

Quote from 1a2b3cppp:

This thread is also interesting to me as I am trying to learn more about covered calls to possibly use some to unload potentially large positions of SPY in the future.

Does an option ever get assigned before expiry if it gets deep in the money?

I once owned SBUX and sold calls against it. They were out of the money when I sold it but the stock rallied and they became deep in the money. I then noticed that my long stock position was assigned TWO DAYS before expiration, so the answer to your question is "yes" but it depends whether or not the broker wants to assign the position.

So although you have the obligation to sell the stock at the strike once it's in the money, and the broker can exercise assignment at anytime, usually it does not get assigned until expiration.

 

[1a2b3cppp]

Quote from ScalperJoe:

I once owned SBUX and sold calls against it. They were out of the money when I sold it but the stock rallied and they became deep in the money. I then noticed that my long stock position was assigned TWO DAYS before expiration, so the answer to your question is "yes" but it depends whether or not the broker wants to assign the position.

So although you have the obligation to sell the stock at the strike once it's in the money, and the broker can exercise assignment at anytime, usually it does not get assigned until expiration.

What happens if:

- You own a stock

- You sell a covered call against it

- a week or so before expiration, the call becomes ITM, but is not assigned

- 2 days before expiration, the stock goes back down and the call is no longer ITM

- at expiration the stock is still trading below the strike price so the call is OTM and expires worthless

The stockholder gets to keep his shares. Does the call holder just kick himself then for not exercising it when it was ITM?

 

[spindr0]

Quote from ScalperJoe:

I once owned SBUX and sold calls against it. They were out of the money when I sold it but the stock rallied and they became deep in the money. I then noticed that my long stock position was assigned TWO DAYS before expiration, so the answer to your question is "yes" but it depends whether or not the broker wants to assign the position.

So although you have the obligation to sell the stock at the strike once it's in the money, and the broker can exercise assignment at anytime, usually it does not get assigned until expiration.

The broker cannot exercise your position anytime he wants. Assignments and exercise come from the OCC and are done on a random basis. The broker decides how customers will be chosen and that process is supposed to be in the Options Agreement.

 

[spindr0]

Quote from 1a2b3cppp:

What happens if:

- You own a stock

- You sell a covered call against it

- a week or so before expiration, the call becomes ITM, but is not assigned

- 2 days before expiration, the stock goes back down and the call is no longer ITM

- at expiration the stock is still trading below the strike price so the call is OTM and expires worthless

The stockholder gets to keep his shares. Does the call holder just kick himself then for not exercising it when it was ITM?

See the OCC Option pamplet on page 12, paragraph three: Woulda-coulda-shoulda

Trying to eke out the last nickel or save some slippage or commissions often comes back to bite you.

If the UL rallies and you make a large percentage of the potential profit weeks or even a month before expiration, it's not a bad idea to cover and redeploy the cash (assuming you're not a buy and hold type).

 

[Took2Summit]

Quote from 1a2b3cppp:

What happens if:

- You own a stock

- You sell a covered call against it

- a week or so before expiration, the call becomes ITM, but is not assigned

- 2 days before expiration, the stock goes back down and the call is no longer ITM

- at expiration the stock is still trading below the strike price so the call is OTM and expires worthless

The stockholder gets to keep his shares. Does the call holder just kick himself then for not exercising it when it was ITM?

Yes, all they can do is kick themselves