Commsec and Options trading

[BrightGreenGlow]

Hey guys, I just signed up and have a question.

Firstly, I have been buying up shares for over a year now and have only sold a couple. I hold big companies like TLS, CBA, BHP, ANZ etc..

I just applied for and was accepted as a Level 2 options trader with Commsec because I wanted to write covered calls. I have a basic knowledge as to how they work but I have not been shown and dont understand how to actually write a covered call on for example 1,000 BHP shares.

I have gone to the Trading section then > Orders > Sell > Options. Sounds good so far then I have to select an Option based on an executed price. ie:

Code C/P Expiry Date Exercise Price Bid Offer Last Last Traded
Time Volume Open Interest Contract Size
BHPJV8 C 28/01/2010 44 0.365 0.405 0.430 15:27:11 168 1,625 1,000

So I select this Option to sell on my 1,000 BHP shares then the form asks me to select a Limit Price???? I dont understand, I thought the Limit Price was the Exercise price which was already chosen when I selected the Option??

I didn't want to ring up Commsec and make myself look like a real dummy, so if anyone could explain (with detail) their last (or made up) covered call they wrote using Commsec that would be great.

Cheers,
PS: Nice forum!!

 

[cutz]

G'Day John,

Before preceeding any further read this ASX publication http://www.asx.com.au/products/pdf/UnderstandingOptions.pdf .

 

[cutz]

Hi John,

I take it by now you would have read the ASX guide.

So to set up a covered call via the comsec website (not iress) make sure you own the correct amount of stock, select sell below the option quote row, on the order pad select open (you're selling to open), enter quantity (normally one contract = a face value of 1000 shares), enter your limit price, (suggest slipping it in just below the ask) then work it down gently till it gets filled.

BTW, the limit price is the value of the premium, so on BHPJV8 (Jan 44 call), the value of the premium based on last sale was 0.40 .

General advice only, please talk to the comsec options desk for further clarification.

Hope that helps.

 

[BrightGreenGlow]

Thanks Cutz.

So basically, pick an option code on the stock you own (ie: BHPJV8 or BHPMM8). Then put in an asking premium per share (ie: 40c).

Also, the option code is predefined by the ASX is it? Just search for the right Month Limit and the exercise price I think is high enough. After that I choose it and set a premium per share (Limit Price) and hope someone takes it on?

If so thanks very much.

PS: Seems to me the Limit Price need to be for example "0.35". Does not accept ".35".

 

[cutz]

Also, the option code is predefined by the ASX is it? Just search for the right Month Limit and the exercise price I think is high enough. After that I choose it and set a premium per share (Limit Price) and hope someone takes it on?

Hi John,

Don't take it the wrong way but can I suggest you do some further reading before laying on a position.

Plenty of useful stuff in the "options mentoring" thread.