Ok. Convoluted but I'm curious. If I buy 1000 shares of a stock at $98 today in January. And then I sell ten Jun 21 2024 $100 calls for $5. (collect $5k credit)... What happens if the stock goes to $102 in a week? Do I immediately get my shares taken away to pay off the Jun call options. Seems like a pretty sweet deal....or do you have to hold margin and options until jun? Any help appreciated in clarifying this for me...thanks
The holder of the call options has the right to exercise them at any time. The length of time that the position will remain open is difficult to predict. Sometimes, if the stock pays a dividend, you can anticipate an early exercise just before the ex-dividend date. But there is no definite way to predict when the calls will be exercised. It is even possible that they will never be exercised. In your example, the price of the stock could fall below $100 the following week, and never rise above $100 again, and the calls you sold would expire worthless without being exercised. Your question, and your reference to "holding" margin and options until June, indicates that you do not have a complete understanding of some of the most basic concepts of how options work. You need a margin account to trade options, but you do not need to use margin to establish the position you are describing. The short answer is that in the example you gave, you have to be prepared to have your $98,000 tied up until June. Of course, you can exit the position before then, but that would involve buying back the calls. If the price of the stock has risen, you will have to buy them back at a higher price than what you sold them for. You also need to understand that if the price of the stock falls, you could lose more on the stock than the $5,000 you collected when you sold the calls. The position you are describing is not a guaranteed profit. There is no such thing as a guaranteed profit... except maybe in some types of arbitrage.
I have done sell calls before, but they aren't that far out...last ones I did were on IWM and I collected the credit and I think that day or day later my shares were swept away. The only options I play now are sell puts usually expiring the day of or day after. I have been assigned the shares a handful of times and have always sold for a profit after the shares have been assigned along with keeping the credit. So a win win.
https://www.optionsplaybook.com/option-strategies/covered-call/ https://www.investopedia.com/terms/c/coveredcall.asp
Nobody is doing you a favor by enabling intellectual laziness. I help when I see a person making an effort to get answers.
Very very basic term (much more complicated)... Call..."hello, I want your stock that I paid money to you, to make this call during any time of our stated period". PS Including the day after (Saturday), of the close of the option...
What do you mean by "PS Including the day after (Saturday), of the close of the option..." Are you saying that the call can be exercised the Sunday after a Friday expiration?