That's cool, many complexities, it takes time to get it.Maybe I’m missing something.
That's cool, many complexities, it takes time to get it.
I think the bit you're missing is understanding equivalent positions, an option strategy modelling tool will help, sharkman raised a couple of valid points regarding your covered call position, legging into one introduces slippage / execution risk, a simple short put will set you up with the exact equivalent position in one trade.
I’m just a bit scared of selling puts without holding the underlying shares at the moment but my confidence will grow in time.
Hi @GunnerguyHello,
In simple terms a covered call carries exactly the same risk profile as a naked put.
Why are you more comfortable buying stock and shorting calls over just shorting puts ?
The first trade I am looking at is selling June or July OTM Puts but above my original 95.4 purchase price, and below current price.
Possible outcomes, 1) Premium will be recieved, if CBA rises the contract will expire worthless and I have gained the premium, curremtly $38. 2) CBA falls below strike, my shares are assigned, sold out, and based on my buy price I make about 3.9% on my original CBA shares after costs.
Sharkman,the bolded part is incorrect for short puts. if it falls below the strike, you will be obliged to buy more CBA at the strike ie. the stock will be "put" to you. what you've described for 2) is bought puts.
Sharkman,the put buyer has the right but not the obligation to sell their shares to you. they're either buying protection for their own stock position, or they're punting that the stock price will fall. eg. if you sell the $100 puts and the stock price falls below that, they get to sell their units to you at $100. even if it falls to $90 or $80, you still have to buy the stock off the put buyer for $100 when they exercise it. that's why they're paying you the premium, to "insure" they get at least $100 for their stock.
Congrats mate !So my Options journey has now officially commenced.
My first ever trade ......
10 June. Sold 1 contract. $106 CBA covered call, 15 July expiration. Delta = 0.194, Price = 0.6. SP was at $100.94.
17 June SP got up to $106.33 but was not assigned.
21 June (today) SP at $98.06, Option Price = 0.219.
I could BTC and gain $36 (a nice bottle of wine for 11 days ownership of the option) after costs or let it ride.
I am currenty looking at selling more covered calls in BHP, ANZ, and maybe FMG tomorrow morning.
Happy so far and excited.
Slowly slowly ....
Gunnerguy.
(Wanting to suppliment my Dividend and Capital Gain Incomes with some Options trading Income).
$1.17 per contract using IB as recommended by someone here on ASF, sorry can’t remember who, but will checkCongrats mate !
Early assignment highly unlikely when the underlying hit 106.33 on the july 106 calls, ex div is august I presume ?
How much are you paying on brokerage ?
Dividend declared in AugustCongrats mate !
Early assignment highly unlikely when the underlying hit 106.33 on the july 106 calls, ex div is august I presume ?
How much are you paying on brokerage ?
Hi , I'm getting a a $165 credit at the midpoint ! Max loss should equate to $335 plus commish, plus a little slippage.15 July, 22.5/22.0 Bull Put, 10 contracts. Credit of $68. Max possible loss of -$432, if FMG price goes below $22.0 before 15 July.
| Sell Put | Buy Put | |||
| High | Low | PM | Loss | Delta |
| $22.50 | $22.00 | $168.00 | -$332.00 | 0.297 |
| $22.00 | $21.50 | $108.00 | -$392.00 | 0.084 |
| $21.50 | $21.00 | $125.00 | -$432.00 | 0.057 |
| $21.00 | $20.50 | $43.00 | -$457.00 | 0.044 |
| $20.50 | $20.00 | $33.00 | -$467.00 | 0.033 |
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