covered call profit and loss question

Discussion in 'Options' started by IronFist, Oct 10, 2011.

  1. If the option expires when the stock is at $42, he will show a loss on the option but still a gain on the stock (since his average cost was $36.54).

    In that case, will the paper loss on the option disappear and be replaced with his $58 premium?

    So if the stock is $42, his profit will be $546 for the stock (which he still owns because it was not called away), and then $58 for the premium (despite the paper loss on the option), for a total of $604. Is this right?

    So it sounds like it can technically happen if the option holder wants to do it, but it isn't very likely.

    I was just curious if maybe some guy who is long some options gets all excited when they get ITM and wants to cash them out rather than possibly having them go back OTM before expiration.
     
    #31     Oct 11, 2011
  2. spindr0

    spindr0

     
    #32     Oct 11, 2011
  3. 4 pages for this? The OP was serious?
     
    #33     Oct 11, 2011
  4. Do NOT listen to ^this^ guy.
     
    #34     Oct 11, 2011
  5. Such a troll, care to say what I said incorrect instead of saying stupid useless shit?
     
    #35     Oct 11, 2011
  6. What you stated is grossly inaccurate. All of it.
     
    #36     Oct 11, 2011
  7. Funny for you to stand there and tell me what I stated is grossly inaccurate, yet this is how my account is reflected every single time I sell a covered call. As I also said in my comment, if you know a brokerage firm that does it differently please let me know.
     
    #37     Oct 11, 2011
  8. I can't fix stupid. Figure it out, or don't.
     
    #38     Oct 11, 2011
  9. All I stated was the moment I sell a covered call, my total account value does not increase by the premium, which is true. If you understood or read differently then I am sorry you are challenged.
     
    #39     Oct 11, 2011
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    #40     Oct 11, 2011