My call was called
December 22nd, 2005 by KenricMonday morning my shares of Ebay were gone. The call was exercised so they sold at $45.00. Since I received $1.05 per share for the option, I really sold them at $46.05 per share which is pretty good.
I’m hoping to get some google with the money but it just keeps rising!
Posted in Finances | 7 Comments »
Stumble it!
Can you post some info on your decision making process for this? I’m looking at selling some covered calls and am interested in how to determine the strike price and expiration date to sell them at.
By Shaun on Jan 5, 2006
I sell a covered call when the stock I am in is not performing that great. So in this case EBAY was around 40-43 and I wanted to sell it anyway. I would have been happy to sell it at 43. So I looked at a 45 call on the next month which had a $1.60 price. By selling this call I effectively was saying I will sell my EBAY stock at $46.60, which was $3.60 over the price I would have been happy with.
Of course EBAY could have gone to 60 and I would have lost out on $13.40/share. That is the main risk. I wouldn’t do this with Google!
By monarchcrest on Jan 5, 2006
No, definitely not with Google :-)But I own SFI and it’s been trading in a range for some time and I’m thinking about selling some calls to pick up some extra cash. I like the stock though and if I do get called, I’d buy it back.
By Shaun on Jan 6, 2006
You can always sell calls at a price so high that they will probably never get called. The downside is that they’re only worth a few pennies. You just have to strike that balance of risk of it being called and price per option contract.
By monarchcrest on Jan 6, 2006
Yeah, but I’m not so sure about that. The last time I sold covered calls was maybe 5 years ago. At the time the call expired, they were barely in the money. I think I sold them for $0.50 and the stock closed at $0.20 over the strike price. I figured I wouldn’t get called since whoever bought the calls from me was still underwater by 30 cents. Wrong. I was called anyway. I did some more research and it turns out that my broker (at the time, this was E-Trade), randomly picks whose calls are called when an option expires in the money. So the person I sold the calls to might not have been the one who bought my shares. Now it may be different for different brokers, but it’s something to keep in mind. Even if you sold an option for $3 and it expired in the money by only 10 cents, you still might get called. (Of course, this is actually good for you, since you effectively sold your shares for $2.90 over the going price…)
Anyway, I think I’m going to go ahead and see if I can sell some calls and pick up some extra money..
By Shaun on Jan 6, 2006
If the call is in the money (after commissions) it will be exercised no matter what. My friend had one that was for a total of $1.50 after commissions. The brokers will glady take that $15 for them, even if it only makes you $1.
BTW, I’ve been buying GOOG options and doing fairly well, but its a roller coaster.
Bought some AAPL options today.
By monarchcrest on Jan 6, 2006
Another thing to think of, if it only is exercised $0.20 in the money, go ahead and buy it back immediately, you’re only out the commission but you still made money on the call.
By monarchcrest on Jan 6, 2006