How are account balances shown on a daily basis for covered calls?

W

Wil Klem

This question is presented to learn how market movements and assignments are reported when viewing an account on a daily basis. I am presenting a hypothetical example to frame my questions. Commissions are intentionally omitted to simplify things here.

  1. buy 100 shares XYZ @ $48.50, sell 5/20 $50.00 call @ $0.90
  2. XYZ closing price at the end of the day is $49.25 (+0.75)
  3. XYZ high price for the next day is $50.10 (.10 above strike price)
  4. XYZ is assigned @ $50.00, 100 shares sold @ $50.00
Is this how the account is shown?

CASH BALANCE****************************ACCOUNT BALANCE
1.) previous balance - $4850 + $90888888previous balance + $90
2.) no change********************************previous balance + $75
3.) no change********************************no change
4.) assignment price is $0.75 higher than previous day closing price, and $1.50 higher than purchase price; therefore:
***previous balance + $5000*************** previous balance + $75

...OR... Are intermediate closing balances and call premium not reflected in account balance, leaving updated account balance static until all positions are closed?

Thanks for your replies.
 
Buying Power and P/L would be your main concern. Cash and account balances are sometimes not updated until the next business day.



:)
 
Thanks for your replies.

cvds16:
You are right. I am confused. I am a newbie attempting to learn by paper trading and recording everything on a spreadsheet. You said "everything is marked to market every day. That should be the key to your account balance." I thought that is what I did. What am I missing?
 
you have to subtract the value of the call every day ... also the value of your stock you have to add every day (you kinda did this more or less) ... + cash that gives you total account balance
 
Something isn't making sense to me here. You said, "you have to subtract the value of the call every day ... also the value of your stock you have to add every day". Account balance includes cash balance, right? Would "value" you mentioned be the change in the call value and stock values? Would the value of the call be subtracted from account balance because it is a short position?
 
you don't actually need to take the change, you simply take the market value ... although the results should be the same
 
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