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calender spread on stock i own
I sold a $17.50 strike price and took in $810.00 or $2.05 per share on 4 contracts the stock is currently @ $16.62 and $0.126 is the current option price and tomorrow is d day so do i get to keep the 810.00
Best Answer
989 points
rvilmur answered one year ago …
If the stock stays below or exactly at 17.5 at Thursdays close, you get to keep all of the call writing income and your stock. If so, on Monday you can write another call on your stock for more income. Your outlook for the stock should be stagnant to slightly up and you should be willing to let the stock go if the next option sale expires in the money.
One thing about covered call writing that most people do not recognize (also most brokers) is that it is has the same gain-loss profile as selling a naked put at the same strike. This means that covered call writing is not always safe; as it wiil burn you the same as a naked put if the stock tanks. It costs money but this can be prevented by buying a protective put at the next lower strike. This position is called a collar.
Answers
116 points
JakeTollman answered one year ago …
roy,
If you sold the call, and the stock stays below 17.50 on Saturday, then yes, you keep the $810, no commissions to close the short call. But, if you think it will rally, you could close the short call by buying it back for the ask, if you say .126, that would be about $50 + commissions. That's the only sure way to not have your stock called away.
435 points
larryat36 answered one year ago …
Dont know what the stock is but if it is anywhere the 17.50 price at expiration buy it back unless you want to want to get rid of that stock at that price.
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104 points
scott715 answered one year ago …
Better yet, buy it back and sell the same call for April. Assuming that you want to hold on to the stock. Be careful, if the stock tanks then you lose more than what the call brought in.
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116 points
CollegeKid answered one year ago …
I wish I knew what stock you were talking about. I could look at a chart and figure out its current resistance level in this market and give you a pretty sound answer. I believe that after the violation of support levels for the 3 major indices that the market is in bearish territory as a whole. This means your stock probably won't make it back above that 17.50 before expiration. If you don't want to give up the stock, buy back the short option. If you don't care that much about the stock, let it expire, tomorrows bound to be another duesy for the stock market and then you don't have to pay the trading fees for options worth more than a nickel per share. If you want to hedge your position affectively sell the April calls on your stock as well. You might as well make some money in this market.
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