- Synthetic Long Position - Synthetic Call - Synthetic Put
- Long Stock vs. Short Option - Born To Sell
- Long (or Long Position) - Investopedia
- Long and Short Position, Call and Put in Options
For the term of the option strategy, the investor is looking for a slight rise in the stock price, but is worried about a decline.
Synthetic Long Position - Synthetic Call - Synthetic Put
Covered call investors do not short stock, but do short call options. It is the short option that generates the income for a covered call investor. See next page.
Long Stock vs. Short Option - Born To Sell
Great trade, congrats! Yeah, it s really hard to advise as the decision to exit or continue is really up to you. Sure, there will be some time decay especially if the option is out-of-the-money and close to the expiration date. So, if you are happy with the profit so far then it might be a good idea to exit and then either buy another call further out or look for another opportunity.
Long (or Long Position) - Investopedia
Hi Eric, yep, short calls are very risky - especially on single stock options or commodity options where the potential for a large upside swings exist (takeovers etc).
Index options, however, are not prone to the same kind of upside price deviation so a short call strategy might be more appropriate for a speculator on index options.
Even though the payoff describes an unlimited loss profile, remember that you have the option to exit/adjust your position throughout the life of the trade. If you re short a call option and the market begins trading higher towards your short strike you can always exit the position with a small loss - you don t have to wait until the options expiration and suffer a potential account breaker.
Long and Short Position, Call and Put in Options
I think it depends on your broker and if you can buy the stock on margin. But you can surely sell to close prior to exit the position and still profit from the increase in the options price.
I have question concerning two long call positions I m attempting to open.
I normally Buy to Open, slightly in-the-money, at the Bid price.
I am noticing that it takes time for my orders to leave the Open status and become active.
Does this mean that my limit price set at Bid is too low? What would you reccommend in this scenario? Increase my limit closer to or at the ask price?
I missed the opportunity of gaining a few points because of my order not activating, I also run the risk of the order getting processed too late (before a reversal).
For example, if you think ABC stock will decrease then you can sell 655 shares (which you don't currently have). You receive cash from the sale today and are now short 655 shares of ABC. Your brokerage statement will show -655 (negative 655) as the number of ABC shares you own. At some point you will need to buy 655 shares of ABC to cover your short position.
A few more questions:
6. If I sell the option on the last day before it expires, can the option be exercised against me by the new buyer after the expiration date?
7. If an option is ITM and I let it expire, will the broker lodge the value of the option to my account? Will he include the profit it has made?
8. If I want to buy then sell options and not exercise them, will the broker insist that I have sufficient funds in my account to cover the potential exposure from a buyer exercising his rights? Is it possible to buy insurance rather than have the collateral in my account to protect myself against same?
Let s say, for instance, I want to maximize my profit with a call option of a stock I m pretty sure will go up tomorrow. Let s say I don t mind the risk. Which call option should I buy? One that is exactly ATM? One that is slightly OTM?
The maximum loss is limited for the term of the collar hedge. The worst that can happen is for the stock price to fall below the put strike, which prompts the investor to exercise the put and sell the stock at the 'floor' price: the put strike. If the stock had originally been bought at a much lower price (which is often the case for a long-term holding), this exit price might actually result in a profit. The short call would expire worthless.