Selling In the Money Covered Calls

[options4me]

Quote from KAWill70:

Is this correct? Did you mean 90?

If you sell a covered call at a strike price of 100, and the stock rises to 110, isn't the option buyer ten dollars in the money?

He would exercise if still in the money at expiration.

CORRECT!

Once the option closes at expiration at least $.25 ITM (I think that level is correct, but it may be different) The option will be exercised. That being said you will be on the hook for the difference between the strike you SOLD and the expiration price.
The Stocks you have will probably be assigned to cover the shortage.

 

[forex-forex]

Quote from gkishot:
You can write OTM options. They have a lesser chance of assignment.

Quote from forex-forex:
They have zero chance of assignment. Why would anyone buy a stock for more than it's worth?

Quote from gkishot:I'll sell a covered call at a 100 strike and when the price moves to 110, I'm a genius, because no one will exercise a 100 call option with the price at 110.

Quote from forex-forex:
We are talking about OTM options, your example is using ITM options. Lets stay on topic.

Quote from gkishot:They were OTM calls at the time they were sold. How is it off topic?

READ the posts dimwit



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forex-forex
Trading guru

 

[MTE]

Quote from options4me:

...Once the option closes at expiration at least $.25 ITM (I think that level is correct, but it may be different)...

It was actually cut down to 0.01 (no, that's not a typo, the automatic threshold is 1 cent.)

 

[KINGOFSHORTS]

I wrote ITM GE calls (22s for november) and they have not been in the money for quite some time Infact they are gonna expire worthless for the buyer.

Horses for courses.

 

[KINGOFSHORTS]

Quote from MTE:

It was actually cut down to 0.01 (no, that's not a typo, the automatic threshold is 1 cent.)

lol could you imagine of someone buys a large number of call options and makes the assumption it will expire worthless (and assume options never get assigned automatically for buyers) only for it to be ITM by 1 penny and they check their account on monday to see a big ass portfolio liquidation


I know they use the term "You have the right but not the obligation" but they should add a little disclaimer for the noobs who buy contracts.