@Optionspuppy：$Alphabet(GOOG)$$GOOGL 20250117 130.0 CALL$ Am milking Google and will not be doing anythingfor selling call before the results cause I think will beat estimates for Google as it's estimated too Low If it drops more I will sell put At $80 and taking apremium of $10 and lower the cost of price $70 if really hits However earn 0.20 is better than earn nothing in this environment But maybe is better just to sell call and hold oncethe market is higher @Daily_Discussion@TigerEvents@TigerStarsdo feature for people to learn sell put and sell call when have the stock What is selling a covered call? Selling a covered call means opening a contract that gives you the obligation to sell shares of a stock you already own, at a certain price (the “strike price”) up until a set date (“expiration date”). In exchange, you receive an upfront amount (the “premium”) for selling this contract. A typical short call option entails the obligation to sell 100 shares of the underlying stock, and the call is “covered” because you already own the shares you might have to sell. Because you have this obligation and hold the stock, in general it is beneficial for the stock price to stay relatively flat or increase moderately, and undesirable for the stock price to fall significantly. Your maximum potential profit is limited, but your potential losses are limited too. Here’s some lingo to describe how your short covered call option is performing relative to the stock price: In-the-money: The stock price is above the strike price At-the-money: The stock price is at the strike price Out-of-the-money: The stock price is below the strike price Please note: Robinhood does not allow uncovered or naked positions, as selling a call on stock you don’t own may involve the risk of unlimited losses. When might I use this strategy? You might consider selling a covered call if you think a stock price will stay relatively stable or rise somewhat in the near future (i.e., you have a neutral-to-bullish outlook). You can only do this on Robinhood if you own enough shares in the underlying stock to cover the short call if it’s assigned. One reason to use this strategy is to earn additional income on stocks you own. If you’re planning to hold the underlying shares anyway, selling covered calls can be a way to help generate income from the premiums you receive (aka to “monetize” your holdings). But there’s a tradeoff — You give up the potential to profit if the stock price soars above the strike price. When this happens, the call has the potential to be assigned. (Note: Calls are usually assigned at expiration, but can happen at any time beforehand.) Remember, you’re obligated to sell your shares at the strike price if the buyer chooses to exercise the option. Selling a covered call can also be a way to help protect yourself if the stock price declines. The premium you received for the call can slightly offset your losses. Still, selling a call can’t protect you from losing money if the stock price falls below the breakeven price. What are factors to consider? Here are a few key factors: Expiration date: Selling calls with a closer expiration date means you’re reducing the time frame in which you’re capping your potential gains from the stock you own. If they expire worthless, you can sell calls more often. Selling calls that expire later means you cap your potential profit for longer and can’t write new calls as often. However, calls with a later expiration date usually generate higher premiums upfront, assuming all other factors are constant. Strike price: This is the price at which you’re required to sell your shares if the call is assigned. Assuming all other factors are constant, calls with lower strike prices are more likely to be assigned and typically sell for a higher premium. Calls with a higher strike price are less likely to be assigned and usually have a lower premium. A higher strike price gives you more leeway to benefit from a rise in the stock price, since the ceiling on your potential gains is higher. Contract: Each option typically represents 100 shares. If you sell more covered calls, the total premium you receive is higher. But you also need to own more shares of stock to cover the calls — and if the price of the stock you own increases, there’s potential for you to miss out on even greater gains. However, selling covered calls also offers some downside protection, since the premium you receive can partially offset a decrease in the stock price. Premium: This is the money you receive upfront for selling the call. The higher the premium, the more the stock can drop before you break even on the overall position. But, a call with a higher premium is also more likely to be assigned, which can mean giving up more potential gains if a stock price rises. Calculations Can I see an example? Let’s say you buy or already own 100 shares of the fictional MEOW company at a price of $110, and you expect the stock will stay relatively flat or increase moderately in the near future. You could consider selling a call option for MEOW at a strike price of $125, for which you’d receive a $1 premium per share ($100 total). Maximum Gain or Loss Your maximum potential gain is limited to the difference between the strike price and the stock price, plus the premium you received. You can realize this gain if the call is assigned and you sell the stock, which typically happens when the stock price is higher than the strike price at expiration. Meanwhile, in theory, you’d experience your maximum potential loss if the stock price fell all the way to $0. Like any stock owner, you risk losing the entire value of the shares—except when you sell a covered call, you would keep the total premium you received upfront. MEOW rises to $130 (aka in-the-money) Let’s assume your expectation is right, and MEOW’s stock closes at $130 on the short call’s expiration date. Since this is above the strike price of $125, the call is assigned, and you are obligated to sell your shares for $125 each. Your gain per share is $15, or the strike price ($125) minus the price you paid for the stock ($110). Multiplying by the number of shares you own (100), this comes out to $1,500. You also received a $1 premium per share, or $100 total, for selling the call. So, your total gain is $1,600 (that is, $1,500 plus $100). Keep in mind, this is your maximum potential gain in this example. Even though the stock price rose to $130, the strike price ($125) of the option limits your potential gains. By comparison, if you had only bought and held 100 shares, the value of your stock would’ve increased by $2,000 — that is, ($130 - $110) * 100 shares. MEOW rises to $125 (aka at-the-money) Let’s say MEOW’s stock price closes at $125 on the call’s expiration date. Since this is at the strike price, the call should expire worthless. Once again, your gain per share is the current stock price ($125) minus the price you paid for the stock ($110), which equals $15. If the contract is for 100 shares, you would gain $1,500 from owning the stock. To calculate your total gain though, add the $1 premium you received per share for selling a call option ($100 total). In this instance, your total profit for the strategy is $1,500 plus $100, or $1,600. If you had only bought and held 100 shares, the value of your stock would’ve increased by $1,500. MEOW falls to $100 (aka out-of-the-money) Now, let’s look at what happens if MEOW’s stock price doesn’t move as you expected, and instead closes at $100 on the call’s expiration date. To calculate the decline in the value of your stock, take the current stock price ($100) and subtract the price you paid for it ($110). Multiply this by the 100 shares you own, and this comes to -$1,000. The premium you received upfront ($100) helps offset this decline, meaning your net loss is $900. If you had only bought and held the shares, your net loss would’ve been $1,000. Keep in mind, this is a theoretical example. Actual gains and losses will depend on factors such as the prices and number of contracts involved. What is the break-even point at expiration? You break even on your covered call if, on the expiration date, the stock closes at the price you originally paid for the stock minus the premium you received per share for selling the call. Going back to MEOW, you paid $110 per share to buy the stock. Subtracting the premium you received per share equals $109 ($110 - $1). If the stock closes at this price on the expiration date, the option should expire worthless, and you should neither gain nor lose money. If the stock falls below $109, you should experience a loss. Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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