I rarely trade options. Bought books and learning now. I know basic calls puts, that's all. I know there are so many experts here that can help me. If I own shares of a stock and sell to cover. When the stock hit my strike price will it take my shares away right away or I have to wait until the expiration date?? Thank you!!!!!
I'm assuming you mean "sell a covered call." Normally you will have to wait until after expiration day. There's always a chance of being assigned early, but they go up if there is a dividend or some event that would make somebody want to own those shares immediately.
Yes I meant "sell a covered call." So the individual who purchased my call will decide when he/she wants to sell that call option? or the broker? I misunderstook. I thought that when the stock hits my strike price, my shares will be called away immediately. Thank you so so much.
The stock price hitting the strike price has nothing to do with anything Most of the time, it will happen at expiration. Reasons for early assignment include: 1) Certain dividend situations 2) Option is ITM and trades below parity (parity is the intrinsic value which is the stock price minus strike price) 3) And infrequently, "dumb money" (holder exercises, not realizing that it's better to sell option with remaining time premium rather than exercise). Exercise is very bad for you so just lay there and stuff your face with chips!
If you are a reader who agrees with 2nd sentence in above statement, could you give us your proof/argument behind your agreement? If you disagree your input would be appreciated even more!
For a beginner option trading like me, rules must be extremely clear. I want to try a sell to cover trade but haven't be able to try because I'm still not sure. I almost made a trade today just to see but couldn't hit the button. I searched the internet for information but it was not 100% clear to me. Thank you for your messages. I will continue to read and I will become very knowledgeable one of these days.