New to writing options - selling CVX options

[toben]

Hello, although I have bought options before I am about to attempt my first writing and wanted some risk feedback to make sure I am doing what I think I am doing.

I own 400 CVX- its at 82.63 today. I want to write 4 calls for June 85 strike price.

So I sell 4x CVXFQ at 0.90
Estimated commission: $12.99
Estimated total proceeds: $327.01

This is what I think will happen:
If the stock price stays below $85 by the end of June, I pocket the $327 and nothing happens.

If the stock price goes above $85 I have to sell my 400 shares of CVX at $85.

I am assuming my worst case scenario is that the stock goes through the roof and I sell at $85. Can anything worse happen? Since I own the stock I can't lose anything can I?

If the stock price does exceed $85 what are the odds that my contracts will get exercised? Will my broker (etrade) sell my shares automatically?

Thanks,
Toben

 

[atticus]

http://en.wikipedia.org/wiki/Covered_call

 

[RobtF]

You will have only one or two cents (I think) leeway above 85 then the shares wil be sold automatically. You have the risks right except maybe one - If CVX starts dropping you'll have to buy back the calls before you can cut your loss on the falling stock.

 

[nazzdack]

The worst case scenario is if the stick goes to zero, not infinity.