Selling itm (covered) calls the same as shorting the stock?

[wxytrader]

If you are holding shares, and sell a covered call itm, would it be equivalent to shorting the stock but without the unlimited risk?

example

ABC trading at $100

Short it and price goes to $105 = $5 loss.
Short it and price goes to $95 = $5 gain.

Sell a 95 call for $5 and price goes to $105 = $5 loss.
Sell a 95 call for $5 and price goes to $95 = $5 gain.

 

[Robert Morse]

No. It is equivalent to shorting the Put on the same strike as the Call for risk and reward purpose except you get to keep any dividends. In essence, the same as a cash secured put.

 

[wxytrader]

No. It is equivalent to shorting the Put on the same strike as the Call for risk and reward purpose except you get to keep any dividends. In essence, the same as a cash secured put.

So the same functionality as a short position with the same risk as a csp?

 

[cesfx]

So the same functionality as a short position with the same risk as a csp?

I wonder how you process stuff sometime lol

Robert said it's the equivalent, the same.

Why don't you just look at the payoff before coming out like this...

 

[jamesbp]

No. It is equivalent to shorting the Put on the same strike as the Call for risk and reward purpose except you get to keep any dividends. In essence, the same as a cash secured put.

cc v csp equivalence is dependant on earning the risk-free-rate on the "cash" used to secure the put ...

 

[BKR88]

If you are holding shares, and sell a covered call itm, would it be equivalent to shorting the stock but without the unlimited risk?

example

ABC trading at $100

Short it and price goes to $105 = $5 loss.
Short it and price goes to $95 = $5 gain.

Sell a 95 call for $5 and price goes to $105 = $5 loss.
Sell a 95 call for $5 and price goes to $95 = $5 gain.

Short the stock at 100:
Max profit = 100
Max loss = unlimited

Short a 95C for 6:
Max profit =6
Max loss =unlimited (loss will be 1 less than shorting the stock)

EDIT:
Covered Call: Long stock at 100 and short 95C at 6
Stock drops to 90 .... loss of 4
Stock rises to 110 ... profit of 1
Stock drops to 50 ... loss of 44

 

[wxytrader]

I wonder how you process stuff sometime lol

Robert said it's the equivalent, the same.

Why don't you just look at the payoff before coming out like this...

But it's not the same lol

 

[poopy]

If you are holding shares, and sell a covered call itm, would it be equivalent to shorting the stock but without the unlimited risk?

example

ABC trading at $100

Short it and price goes to $105 = $5 loss.
Short it and price goes to $95 = $5 gain.

Sell a 95 call for $5 and price goes to $105 = $5 loss.
Sell a 95 call for $5 and price goes to $95 = $5 gain.

Long the stock, short the 95C = short 95P.

 

[cesfx]

But it's not the same lol

prove it with a payoff chart, not with primary school arithmetic

You have been a year here and probably you even read one or two books on options.
It's delusional at this point, hopeless.

It's time to sell your Lambo and trade options with all you've got!

 

[wxytrader]

No. It is equivalent to shorting the Put on the same strike as the Call for risk and reward purpose except you get to keep any dividends. In essence, the same as a cash secured put.

prove it with a payoff chart, not with primary school arithmetic

You have been a year here and probably you even read one or two books on options.
It's delusional at this point, hopeless.

It's time to sell your Lambo and trade options with all you've got!

Long the stock, short the 95C = short 95P.

Yes (and confirmed

I guess what I was trying to demonstrate is that if you are already long the stock, then selling a covered call itm is the same as shorting the stock atm but with limited upside risk and capping downside profits.

This is selling a naked call option. You can see the box matches when shorting a stock...and the upside would be protected by the long stock. The box is the only part that interests me as that is my profit window.

I think that because my TA is so advanced I am finding new ways to exploit option positions.