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There are a couple of times you'd do it.
The first is if you want to automatically lock in a gain. Let's say you have a stock you bought at 15, and you want to double your money on the investment. So you sell a call at 30 with a long expiration date...oh, maybe a year. If at any time the stock crosses the $30 threshold, you exercise the option.
You can also use short calls and long puts (sell a call, buy a put) as a hedging strategy.
And then there's the call you sell when you just want to make money by collecting premiums--you sell a call at a higher price than you think the stock will reach, and hope it doesn't go that high.
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Call option and put option?
A call option allows its purchaser to buy ("call in") stocks at a certain price on a certain date--say, 100 shares of Walmart for $50 on November 1. A put option allows its purchaser to sell ("put") stocks on a certain price for a certain date. The seller of the option has to buy them (in a put) or sell them (in a call) if the option is exercised.
When you sell a call option who gets the dividend?
Dividends don't play into call options. If you sell a covered call and it expires worthless, you'll receive any dividends from the stock because you still own the stock. If it's exercised, the new owner receives them because the stock is hers now. The money that changes hands when you sell a call is the "premium," and the person who sells the call gets that.
Is call option and buy option are same or not?
As far as I know there isn't a "buy option," but a call option is an option to buy so I guess you could think of it as a "buy option."
If a itm call option is 9 and the share is trading at 10 it is itm but why do you say that a 9 put is otm if the share price is 10 what is the history to this seemingly inconsistancy?
When a stock is at $10, a $9 strike price call option allows you to buy that stock at $9, which is $1 cheaper than the market price, hence it is in the money (ITM).Now, when a stock is $10, a $9 strike price PUT OPTION allows you to SELL that stock for $9 when you can actually sell it for $10, so there's no value in it, right? (why would anyone want to sell a stock at $9 when he can sell it for $10, right?) That is why it is out of the money (OTM).It is not an inconsistency but that you did not understand that options moneyness for call and put options are the reverse.
Difference between put option and call option?
The holder/purchaser/owner of a call option contract has the right to buy an asset (or call the asset away) from a writer/seller of a call option contract at the pre-determined contract or strike price. The holder/purchaser/owner of a call option contract expects the price of the underlying asset to rise during the term or duration of the call contract, for as the value of the underlying asset increases so does the value of the call option contract. Conversely, the write/seller of a call option contract expects the price of the underlying asset to remain stable or to decline. The holder/purchaser/owner of a put option contract has the right to sell an asset (or put the asset) to a writer/seller of a put option contract at the pre-determined contract or strike price. The holder/purchaser/owner of a put option contract expects the price of the underlying asset to decline during the term or duration of the put contract, for as the value of the underlying asset declines the contract value increases. Conversely, the writer/seller of a put option contract expects the price of the underlying asset to remain stable or to rise.
What happens if I don't sell my call option before it expires?
If you don't sell your call option before it expires, you may lose the opportunity to profit from it. The option will expire worthless, and you will lose the premium you paid for it.
Call option and put option?
A call option allows its purchaser to buy ("call in") stocks at a certain price on a certain date--say, 100 shares of Walmart for $50 on November 1. A put option allows its purchaser to sell ("put") stocks on a certain price for a certain date. The seller of the option has to buy them (in a put) or sell them (in a call) if the option is exercised.
How can I sell to close a call option before its expiration date?
You can sell to close a call option before its expiration date by placing an order to sell the option through your brokerage account. This allows you to exit the position and realize any profits or losses before the option reaches its expiration date.
What is the option to sell shares of stock at a specified time in the future called?
It's actually called a call option. I will provide you with a definition I just found for this, and some additional tips on options trading. - - - - - The option to sell shares is a put. The option to buy them is a call.
What are the differences between buying a call and selling a call option?
Buying a call option gives you the right to buy a stock at a specific price, while selling a call option obligates you to sell a stock at a specific price.
What is sell a covered call?
A covered call means that you own the underlying stock on the option you are selling. Say you own 100 shares of apple computer. You sell ONE call option which allows the buyer of the option to purchase the underlying 1oo shares of stock at the strike price. If the contract matures, you can then deliver the stock to the option buyer.
What is the difference between an option call and an option put?
An option call gives the holder the right to buy an asset at a specified price, while an option put gives the holder the right to sell an asset at a specified price.
When must a long call option be sold to collect the premium?
Whenever you want. You collect the premium at the time you sell the call.
What is the difference between selling a call option and selling a put option?
Selling a call option gives someone the right to buy a stock at a certain price, while selling a put option gives someone the right to sell a stock at a certain price.
How to write a call option?
To write a call option, an investor sells the right to buy a specific stock at a set price within a certain time frame. This creates an obligation for the investor to sell the stock if the buyer chooses to exercise the option.
What is excersing a option?
Exercising an option means exercising your rights to buy or sell the underlying asset in accordance to the parameters of the option. When you exercise a call option, you will get to buy the underlying stock at the strike price no matter what price the stock is trading at in the market. When you exercise a put option, you will get to sell the underlying stock at the strike price no matter what price the stock is selling at in the market. In both cases, the option you own disappears from your account.
How to buy a call option effectively?
To buy a call option effectively, you need to first choose a stock you believe will increase in price. Then, select a strike price and expiration date that align with your prediction. Next, open a brokerage account and place an order to buy the call option. Monitor the option's performance and be prepared to sell if the stock price moves in your favor.
