Sure.
When you sell a call you take in premium. It has $10 intrinsic value (100 - 90).
If you sell a call without owning the stock, you are in dangerous territory. If the stock keeps going higher, you could theoretically lose unlimited amount - even if it goes up to 130-140 (like AAPL and GS have done in the recent months), you are at a substantial loss.
If you sell a 90 call while owning the stock at 100, you are doing a deep ITM covered call. If the stock is at 90.01 at expiration, your stock will be called away. You keep the premium (which will be $10 plus something). Another way to think about it - you bought a stock at 100 and are obligated to sell at 90 to the call holder/buyer.
Murthy
On Tue, Jun 2, 2009 at 9:25 PM, a a <Praesto12@yahoo.com > wrote:
So you can sell a 90 call on a stock with a current trading price of 100? Wouldn't that make the call more expensive?
--- On Tue, 6/2/09, Murthy N <optionsmaya@gmail.com > wrote:
From: Murthy N <optionsmaya@gmail.com >To: OptionClub@yahoogro
Subject: Re: [TheOptionClub.com] WILL THIS WORK?
ups.com
Date: Tuesday, June 2, 2009, 10:15 PM
Hmmmm. Michael, I believe he said the stock is trading at 100 and not necessarily own the underlying. I could be wrong ...I read it as selling a 90 straddle when the underlying is trading at 100.If the stock goes a lot lower, you could let the stock get put to you at 90. Call will expire worthless.But if the stock goes a lot higher (say to 120), you will lose $30 minus the credit received.Murthy
On Tue, Jun 2, 2009 at 5:30 PM, mcatolico <mcatolico@mindsprin g.com> wrote:
If you sell the put and the call you cannot exercise either option. If it's
European options and the call is exercised, that means the put would have
expired worthless.
Will it work? Synthetically this position is simply short two 90 puts (naked
or unhedged). It will work if the stock goes up or stays above the 90
strike less the net premium received on the short options.------------ --------- --------- ------
-----Original Message-----
From: OptionClub@yahoogro ups.com [mailto:OptionClub@yahoogro ups.com] On
Behalf Of paul7313
Sent: Tuesday, June 02, 2009 7:09 PMstock trading at 100
sell a put and a call at 90
if the call is exorcised, exercise the put (european)OptionClub-unsubscr ibe@yahoogroups. comYahoo! Groups Links
The goal of TheOptionClub is to provide a forum for members to work together
for the purpose of furthering our individual understanding option trading.
All messages and postings, and any materials circulated are provided for
discussion and educational purposes only. No statement contained in any
materials from TheOptionClub should be considered a recommendation to buy or
sell a security or to provide investment, legal or tax advice. All
investors are encouraged to consult a qualified professional before trading
in any security. Stock and option trading involves risk and is not suitable
for most people. There is no guarantee that any information provided is
accurate and, may in fact, be wrong. It is understood that the participants
in TheOptionClub have varying backgrounds and degrees of experience in
option trading, and that regardless of experience each member is considered
a student. As such, any information distributed through TheOptionClub
should be considered with a critical mind and not relied upon as an
authoritative source.
To unsubscribe from TheOptionClub, send an email to:
__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading. All messages and postings, and any materials circulated are provided for discussion and educational purposes only. No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice. All investors are encouraged to consult a qualified professional before trading in any security. Stock and option trading involves risk and is not suitable for most people. There is no guarantee that any information provided is accurate and, may in fact, be wrong. It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student. As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe
.
__,_._,___
No comments:
Post a Comment