How to understand the quoting of buywrites and synthetics. When a broker says that a buywrite is ".70 over" what does that mean exactly?
A buy write is just a covered call done in a single transaction, called a multi-leg trade. The "net ask" would be a debit transaction, meaning you buy the underlying stock at the market price (you can use a limit order) and simultaneously sell call options at the selected strike. The price you see is the current market price of the stock minus the option premium for the expiration and strike levels. You need to buy 100 shares of the stock for every call you want to sell unless you're doing minis, in which case you'd need 10 shares for every 1 option contract. The "net bid" transaction is what you'd do if you wanted to close out your position entirely, by both selling the stock back to the market and buying back the options you wrote. I personally prefer buying the stock and writing calls as two separate transactions for flexibility, because there are situations where I may want to buy back the options I wrote without selling the stock, or maybe selling the underlying stock without buying back the options. To do the latter, your option level with your broker needs to allow naked (uncovered) calls.