Super-newb Question

T

torsoboy

Alright, so I have been reading up on options (almost made it through one whole book! lol) and I have tested the waters with a fairly safe trade. At least I hope it is safe. That is where the question comes in. :)

Here is what I did:
I bought 200 shares of YELP at 24.8499 per share.
The I placed the following option trade:
Sell to Open qty:2 YELP Jun 22 2013 25.0 Call Limit 2.05
It went through at the $2.05 amount

Here is what I was trying to do with that:
Buy the stock, make a few hundred bucks on selling the covered call option. If the stock goes high it doesn't matter since I made my $2/stock and I am happy. If it goes low I keep the stock and am fine with that too.

The question is, is what I intended to do actually what I did? I believe that I did it correctly, but my confusion comes as a result of how it is being reported on my trading account (tdameritrade). It is showing the option as a gain of -$230, which is confusing to me. Just because the option is worth more right now than it was when I sold it (the stock has gone up in value), how is that a loss to me? I still made my $400, so I am confused as to what is being displayed.

I am attaching an image to this post that shows the status of the option trade I made.

Any help would be appreciated.

Thanks!
 

Attachments

you did exactly what you intended to you and provided yelp is above $25 per share by June 21st, you will pocket that $400 in premium that you took in, the other day. the reason you are seeing a negative value for your calls is because they have increased in value and you are short, so you are actually loosing money on those calls, while gaining money in the stock.
 
Quite simply if you wanted to buy the calls back it would cost you $320 (the ask).

You got $205 for them so per call you would lose 205 - 320 = -$115. For 2 calls that's a running loss of $230.

The fact that the short calls are part of a covered call position and that you don't want to buy the calls back is not going to be reflected in your statement. The statement will not reflect that until the calls expire or are exercised.

:-)
 
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