GE covered call question.

noob_trad3r · Feb 6, 2009

I bought 1000 shares of GE for 10.80

I sold 10 contracts for march 1.28

The option is now worth 1.11 GE traded at 11.10

If GE is in the money will I get an assignment notice because people will want to get the dividend?

My though is it will not happen because the time value remaining is still greater than the dividend itself correct?

What happens once exdividend passes? does the call price drop even more because GE stock price has been adjusted 31 cents lower?

I do not care if in march GE is called away. I wanted mainly to get the premium + dividend.

If not I will probably write calls for a strike of 10.

Also how come I do not see April or May?

So in march I have to write a contract 3 months out? I would rather write them 45 days our less out for this.

dagnyt · Feb 7, 2009

Quote from noob_trad3r:

I bought 1000 shares of GE for 10.80

I sold 10 contracts for march 1.28

It's customary to state which option you are discussing.

The option is now worth 1.11 GE traded at 11.10

If GE is in the money will I get an assignment notice because people will want to get the dividend?

My though is it will not happen because the time value remaining is still greater than the dividend itself correct?

'GE" cannot be in the money.
The option can be in he money.

Correct. It would be a mistake for the owner of the March call to exercise.

What happens once ex-dividend passes? does the call price drop even more because GE stock price has been adjusted 31 cents lower?

No. The option 'knows' that a dividend is going to be paid and that dividend is already priced into the option. If the stock opens 31 cents lower on ex-dividend day, the option with 'think' the stock is unchanged

I do not care if in march GE is called away. I wanted mainly to get the premium + dividend.

If not I will probably write calls for a strike of 10.

Also how come I do not see April or May?

Why would you expect to see them?

Do you know, not counting LEAPS, each stock has options that expire in exactly 4 months at one time? You should know that by now.

Each stock has options that expire in the front two months - right now that's Feb and Mar. Plus two more months from it's 'cycle.' For GE, that's Jun and Sep.

You will see Apr once the Febs expire.

So in march I have to write a contract 3 months out? I would rather write them 45 days our less out for this.

No. Patience and you will see Apr options

Mark
http://blog.mdwoptions.com/options_for_rookies/

noob_trad3r · Feb 9, 2009

Thanks for your help. I wrote the GEW CI. It is deep in the money now so I will probably get assigned on expiration but I do not care. I wanted to harvest the dividend and the premium.

This option stuff is very nice.

dagnyt · Feb 9, 2009

Quote from noob_trad3r:

Thanks for your help. I wrote the GEW CI. It is deep in the money now so I will probably get assigned on expiration but I do not care. I wanted to harvest the dividend and the premium.

This option stuff is very nice.

If you want help and seek comments, why say that you wrote GEWCI?

Why is so difficult to say GE Nov 87 put? or whatever this option is.

CI is Mar 45 call, but I have no idea what GEW is.

Mark

JJacksET4 · Feb 9, 2009

Mark,

The GEWCI mentioned is actually the March 11 call.

As I'm sure you know, GE options usually have GE followed by the options code. However, there have been more options made for GE then usual because of the market. I guess GEW was used to make more codes available.

Of course, I agree it's easier for others to read if options are put in the proper explaination format:

GE Mar 20 Call
GE May 15 Put

JJacksET4

noob_trad3r · Feb 10, 2009

Sorry about that. I am so used to using these options symbols that I automatically just use them instead of putting up the detail.

Too much time on these screens.

Corelio · Feb 10, 2009

Quote from noob_trad3r:

Thanks for your help. I wrote the GEW CI. It is deep in the money now so I will probably get assigned on expiration but I do not care. I wanted to harvest the dividend and the premium.

This option stuff is very nice.

It is very nice until it goes against you.

noob_trad3r · Feb 10, 2009

Quote from Corelio:

It is very nice until it goes against you.

Life is full of risks. That is why if you make a decision you have to be willing to live with the risk factor.

GE Might close out of the money come march once the short sellers ride GE back down once ex-dividend is out and they no longer have to worry about paying out the dividend.

I would not go long GE at these prices.

dagnyt · Feb 10, 2009

Quote from noob_trad3r:

Life is full of risks. That is why if you make a decision you have to be willing to live with the risk factor.

Unless you are a gambler, you DON'T have to live with the risk factor.

When risk of a given position makes you uncomfortable, it's time to make a position adjustment (even if it's a small one) to reduce some, or all, of that risk.

Mark

noob_trad3r · Feb 10, 2009

Quote from dagnyt:

Unless you are a gambler, you DON'T have to live with the risk factor.

When risk of a given position makes you uncomfortable, it's time to make a position adjustment (even if it's a small one) to reduce some, or all, of that risk.

Mark

True I am willing to take a risk but one that I can sleep well at night.

that March 11 call option gives me a little extra hedge which is nice. If I get assigned, fine if I do not I am also fine with this.

GE is so volatile though, no wonder the premiums are high for GE

Up like 13-14% one day and down almost as quick the next.

Anything can happen in the remaining days of this March 11 call.