Monday, February 20th, 2017

Covered Call possible assignment part 2?

Hi, again i am Asking this question. Bought shares at 28. 09Sold 25 CALL for $ 2. 542 days to expiration date. Market price 27. 39The holder exercises the option right, and buys the shares at 25 and sells for Them 27. 39. His profit is equal to 2. 39 minus the fees. That’s less Than I have paid for the option and THEREFORE Receive a loss. . . Will Most Likely buyer so close the position and Will not buy shares? The concept of the strategy is to not to sell shares and still keep premium. Thank you for help, sorry for dumb question it’s my first options trade

Comments

3 Responses to “Covered Call possible assignment part 2?”
  1. Raysor says:

    Why would the buyer sell the shares? He may just exercise the call and take up the shares at $25.
    You also only state one price for the stock?? Would be more useful to use bid/offer prices. Aren’t options usually automatically exercised if in the money?

  2. JoeyV says:

    You are not thinking about this right. If the option buyer does not exercise the option he losses the whole premium. If he exercises he loses only a few pennies. Bet your life that these options will be exercised.

  3. PrivateBanker says:

    The option is “in the money” at the $27.39 market price. Typically you (he) would exercise an option that is in the money. This does not ensure that he makes a profit. But if he does exercise, then sells, his loss is only (Fee for the option) $2.54 – (Difference b/t mkt price and strike price) (27.39 – 25 =) 2.39 = “net loss” of $0.15. Keep in mind, there are still two days to the call option expiry – so he may not act until then. (FYI- This is for an American call option. A European call option cannot be exercised until the last day of the option.)

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