In the Money covered call + premium

[TheoHornsby]

Quote from KINGOFSHORTS:

Incorrect. you sold a call with intrinsic premium so your profit would be 2 not 8.5

Looks ike he said the strike + premium = 8.5 What's wrong with that?

 

[TheoHornsby]

Quote from medisoft:

I know that only 1 stock over strike then it can be exercised, but the question here is, if the buyer paid 2.5 premium (i mean 2.5*100 per contract), and right now if she exercise will need to take a loss, is it probable that the buyer actually exercise? Or will let the contract to expire?

If there is time value left in the option it's not likely to be exercised. Posible but not likely.

 

[medisoft]

Quote from TheoHornsby:

If there is time value left in the option it's not likely to be exercised. Posible but not likely.

Thanks.

Well, the stock is now below the strike, and if it finishes below I will not be able to test what happens there

But what I really tested right now is the strategy with 100 long stock, 1 short call in the money with very good premium (25%>) and a far in time long put.

With this strategy, no mater that the stock is down by 38% I'm still on profit, if the call expires worthless i preserve the premium (2.25$), can sell the stock with a 2.26$ loss and can sell the long put with a 0.65$ profit.

I think this strategy works well with companies that are expecting FDA approval What do you think?

 

[spindr0]

Quote from medisoft:

With this strategy, no mater that the stock is down by 38% I'm still on profit, if the call expires worthless i preserve the premium (2.25$), can sell the stock with a 2.26$ loss and can sell the long put with a 0.65$ profit. I think this strategy works well with companies that are expecting FDA approval What do you think?

It's a really good strategy when the stock is down no more than the intrinsic value of the call. When it's down a lot more, it's a terrible strategy.