Question about the profit for call option

Discussion in 'Options' started by migreen06, May 18, 2022.

  1. migreen06

    migreen06

    I have a call option for microsoft with a strike of $105 that expires in 30 days and the stock price went up to $254. That means that, right now, the running position statement should show a profit... right? According to Think or Swim, the P/L is $-1,242.50! Does anyone know why?
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    Last edited: May 18, 2022
  2. You bought it for 159.35. At the moment it is 149.08. So result = -1027. -1242 is the daily loss
     
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  3. smallfil

    smallfil

    How much did you pay for your MSFT Jun 17 2022 $105 Call? Right now, it is worth $147.00 or $14,700 (bid price). If you paid more than $147.00 per contract, you are losing monies. Take note that options has volatility which can spike or crash the options premium. Add to that, expiring options have time decay and what happens is the option premium wastes away and goes down, the nearer you are to options expiration.
     
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  4. migreen06

    migreen06

    I spent WAY too much, luckily it's only a simulation. I wasn't completely paying attention, doing too many things at once. Yall are correct, the price I paid, times 100 for each share, is why my profit is in the negative. Thanks for the help!!
     
  5. migreen06

    migreen06

    So, follow up question, in this situation, would it be better for me to just exercise it so that I can get those shares for the $105 strike price and sell them for the new price of $254?
     
  6. smallfil

    smallfil

    You will still lose monies either way. The cost of the option will be part of the cost you incur in addition to $10,500 cash. So, $15,935 + $10,500 = $26,435. $25,400-$26,435 = -$1,035 loss. MSFT is headed down based on the trend. Better to exit and close your position call option. When you are trading real monies, you will have to decide on the spot to minimize losses.
     
    migreen06 likes this.
  7. Baozi

    Baozi

    you could do that, but it would not improve your situation, that price difference was already baked in the calls you bought.

    If you think MSFT won't go up in the near future, best course of action would be simply closing the trade.
     
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  8. migreen06

    migreen06

    Thank you for your help. I sold it, lost $427 not that bad... at least I learned a lot.