They clearly got it wrong. Bring it to their attention.
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Options - how does this work?
- Thread starter drosengarden
- Start date
Quote from drosengarden:
From what I'm reading from other posts - the suggestion is that Scottrade is making me "ante up the margin" to cover the options in the event they get called away. I'm not sure why this is?
Because they do not know what they are doing. Take the suggestions of others and call to ask. I bet you will not like their answer.
But could somebody please help me understand the math so I can see exactly what is happening here?
When you buy stock and write calls, the total cash used is the amount by which your buying power (not counting margin) is reduced. In other words, when you sell the covered calls, your BP should increase, not decrease
And many of you are right - Scottrade is not good for options. I cannot do any nakeds.
Advice. Do not write naked calls. Ever.
Do not write naked puts unless you WANT to own stock at a lower price.
Use spreads to reduce risk.
I found another broker - seems REAL inexpensive - www.ChoiceTrade.com - whaddya'll think about them?
Don't do it.
Price is NOT everything.
Stick with Coach's advice.
Mark
Quote from drosengarden:
Jun,
Sorry about that - the Strike Price of the calls I sold are $16.00. So in fact the calls were ITM by a little under $0.06/share.
From what I'm reading from other posts - the suggestion is that Scottrade is making me "ante up the margin" to cover the options in the event they get called away. I'm not sure why this is?
But could somebody please help me understand the math so I can see exactly what is happening here?
And many of you are right - Scottrade is not good for options. I cannot do any nakeds. I found another broker - seems REAL inexpensive - www.ChoiceTrade.com - whaddya'll think about them?
Thanks for helping me with the math in advance.
Even with your strike being slightly ITM, that shouldn't take away your buying power by that much. I've been crunching some numbers and it doesn't really make sense to me at all. Maybe you should call up their help line to see what's up.
I use optionsxpress.com. Their options platform is really great. thinkorswim.com is also good, but I've never used them before. It looks similar to optionsxpress. I do admit that the commission is a bit high. But, I've been with them for over 4 yrs. I'm a loyal customer I guess.
Jun
www.tplinvestment.com