New to Options

[Trying2Make$$]

Bought 400 shares Roblox at $64.5, someone told me I could make money selling premiums, so I research some about this and is it called covered call? but going to my etrade account and option covered call is I will have to buy 100 shares and "sell Open" 1 call option, should I just delete the 100 shares and keep the "Sell Open" say 4 call option for April 95 $4.5, is this right?

Thanks

 

[GaryBtrader]

You need to educate yourself a little more in terms of how this really works and the risk involved.....
You definitely don't want to "delete the 100 shares". This would leave you with an uncovered (naked) short call which is highly risky.
Since you have 400 shares you can sell to open 4 calls on RBLX to bring in the ~ $4.50 in income per share. Just be aware that if the price of RBLX goes beyond $95 by April 16th your shares will be called away and you will be flat (with a nice profit as a bonus side effect).

 

[MrMuppet]

pls, pls for the sake of your accounts well being. Read some books before you even think about short selling nonlinear financial instruments.

no need to thank me

 

[BKR88]

Bought 400 shares Roblox at $64.5, someone told me I could make money selling premiums, so I research some about this and is it called covered call? but going to my etrade account and option covered call is I will have to buy 100 shares and "sell Open" 1 call option, should I just delete the 100 shares and keep the "Sell Open" say 4 call option for April 95 $4.5, is this right?

Thanks

Yes, you can sell 4 calls against your current position (400 shares).
Just use the standard option trading tool rather than covered call since you already own shares.
Under options, use "Sell to Open".
If you sell Apr. 95 Calls:
You collect $4.40 x 4 = $17.60 x 100 = $1,760.
If you hold these till expiration in Apr., you'll keep the $1,760 if price of RBLX closes below 95 and you'll keep your shares.
If you hold these till expiration in Apr., you'll keep the $1,760 if price of RBLX closes above 95 but your shares will be called away at the 95 price.

 

[Trying2Make$$]

Thanks everyone, esp BK and Gary and Yes MrMuppet I will read more on this but no books will ever replace actual experience ..my roblox sell target is 90-100 so If I Sell to Open @95 "If you hold these till expiration in Apr., you'll keep the $1,760 if price of RBLX closes above 95 but your shares will be called away at the 95 price." then I am happy but happier it it closes under $95 so I can repeat the process ..worst good thing can happen is I sell for $95, collect the premium, stock goes back to $65, buy it again and repeat process ..hope I said that right

 

[tayte]

... is it called covered call?

Thanks

FYI: Covered Calls = Synthetic Short Puts. Look up selling naked puts, and if that works with your investment risk, goal objectives.

 

[Trying2Make$$]

FYI: Covered Calls = Synthetic Short Puts. Look up selling naked puts, and if that works with your investment risk, goal objectives.

Thanks I'll only be selling the ones I have (4 contracts), from what I understand naked puts are stock I don't currently own, did I get something wrong or misunderstood something?

I Have etrade level 2 which cover what I am doing. option naked puts are level 3, covered call/sell to open are level 2, can my sell to open call turn into naked options ? I'll be doing only Sell to open call options

 

[JSOP]

Thanks everyone, esp BK and Gary and Yes MrMuppet I will read more on this but no books will ever replace actual experience ..my roblox sell target is 90-100 so If I Sell to Open @95 "If you hold these till expiration in Apr., you'll keep the $1,760 if price of RBLX closes above 95 but your shares will be called away at the 95 price." then I am happy but happier it it closes under $95 so I can repeat the process ..worst good thing can happen is I sell for $95, collect the premium, stock goes back to $65, buy it again and repeat process ..hope I said that right

Yes but have you considered what happens when the shares actually rose above $95 before the April expiration date? You can't sell the shares because if you do your calls won't be covered anymore should you get assigned before expiration. You have an what's called American options. Your calls can be exercised at any time before the expiration date. you will be short 400 shares @$95 per share. And if the shares continue to rise afterwards, you will be in a short squeeze.

It's great you want to learn through actual experience but be prepared for the tuition you are going to pay. Wall Street is the most expensive place to learn anything as any of the traders will tell you.

 

[OptionsOptionsOptions]

No options on RBLX yet.
Covered Calls are pointless - you end up selling the shares at a discount to the current price.

 

[JSOP]

Thanks I'll only be selling the ones I have (4 contracts), from what I understand naked puts are stock I don't currently own, did I get something wrong or misunderstood something?

I Have etrade level 2 which cover what I am doing. option naked puts are level 3, covered call/sell to open are level 2, can my sell to open call turn into naked options ? I'll be doing only Sell to open call options

IMO naked anything should never be allowed. LOL It should be level forbidden.