Covered Calls-Writing Covered Calls

johnnydogg2002 asked:


In an individual account, if you sell a covered call against a stock you own and then get called out but buy the stock right back, what kind of tax consequences is this? Is the gain on the premium of the covered call considered a short term gain of income or short term capital gain?is the sale of the stock when you get called out considered a sale of stock even though you bought the stock right back? Is there any wash sale rules that come into play here? Can any explain what’s goin on in a situation like this, accountants have had trouble answering me. Thanks

Forrest Pesante

Andy-Roo asked:


I know there’s a couple of irish songs that U2 covered with acoustic guitars. One of them sounds like a lullaby. Do you have any idea what the songs are called?

Ami Balcitis

Curious asked:


How do I keep the person interested? We ships supplies billed to medicare absolutely free to the patient every 3 months no gimmicks. I understand the more calls I make the better I get but I need to come up with the perfect “script”. Most people already have a company who ships their supplies. I want them to allow our company to send their supplies. What can I say to make these people want to change suppliers?

Vern Cerulli

John asked:


I’ve been looking at writing a covered call. If I do this and the spot price goes down I will be losing money since my stock is losing value. I will still have the premium from writing the call.

If I understand things correctly, the price of the call option will also be decreasing during this time for two reasons:

1. the call will be farther out of the money
2. the expiration date will be approaching

This means I will be able to close the option for less money than I received when writing it.

What I am wondering is if the option price ever drops fast enough that I can close the option and sell the stock before I have lost more than the premium I received from writing the option in the first place.

I am guessing this rarely happens, if ever, but I am not sure and am looking for more of an explanation of how this works.

I have read that the break-even point is
purchase price of stock – premium received

I’m not sure why I feel like there should be a break-even point slightly higher with the cost of the option figured in as well. Something like

purchase price of stock – premium received + current option price

I’m sure this all sounds silly to anyone who understands things better but please bear with me- I’m trying to learn here.

I’ll try to give an example of what I’m thinking of.

Say the purchase price of the stock was $50 and the premium was $5.

I understand that when the stock price reaches $45 that the premium is now lost. If this was expiration day it makes complete sense that this is the break-even point.

However, if it is not yet expiration day then it might cost $1 to close the position meaning that break-even would have been at $46. Yet at $46 it would have cost even more to close the position…

I’m guessing these numbers constantly chase each other. Are there any specific ways traders look at situations like these to limit their losses?

For instance, if the trade $50 purchase with $5 premium was a real trade, are there specific strategies which would suggest selling before the break-even point while closing the position instead of waiting until after the break-even point?

I’d love to see the pros and cons of doing either of those and learn more about this.

Thanks!

Warren Edmister

John asked:


I haven’t seen many examples of options online which actually include commissions. What I’m wondering is if I purchase an In The Money call is there a price between the market price at call purchase (not sure what this is usually called) and the strike price at which I can buy back the calls and sell the stock without suffering a loss?

I know that if I wait until the stock price (spot price after option entered?) hits the strike price then it will cost me a new premium (lower than what I originally paid though) to buy back the calls plus the transaction costs to get out of the contract. But what if the market price is a bit higher? Would the cost to buy back the premium be higher such that I would still incur a loss or is there typically a “sweet spot” at which point the option can be closed and the underlying security sold without losing money?

I know there are a lot of different options strategies out there, I’m trying to understand this one well before learning others. I know most of my questions have been answered by a few individuals so thank you both for taking the time to answer them. The pieces of the puzzle are starting to come together- I think at least!

Carmelita Steffan

Carbonbased Lifeform asked:


Where’s what I have learned so far that I can use to make money and protect my money in the stock market:

Monitor MACD, Stochastics and one other thing (I forgot what it was) If all three indicators lines up, you either buy or sell.

Cover Calls: You can make money by sellingl someone the right to buy a stock at a certain price before a certain date. It is like owning property and taking in rent, except you own stocks.

“Protection Put” ?(not sure what it’s called): You buy the rights to sell your stocks for a certain price (even if the market price is lower) before a certain date.

What other concepts is there not listed here? Please compare this with your knowlege of the stock market and fill in what is not here that you know.

What all should I do to train myself to become good at making money on the internet? Give me some links or recommend some books please. I want to learn all about trading. I’m an absolute beginner. I don’t even have an account opened yet
correction for the detail section above: “stock market”, not internet

Erwin Schoonhoven

dsjnix asked:


I am looking online to find the “knob” or “button” that goes over the accessory thingy in my 03 Saab 93. It’s the thing that you plug accessorie items into or phone charger. It is missing the knob to cover it up when not in use. What is this cover called and where can order it?

Quentin Posik

RonE asked:


OK here’s the info bought 100 sbux for 36.60 wrote 37.50 nov 06 calls for 1.00. My queston is can I write calls that are lower in price then my buy price?. ie 35 nov 06 calls for 2.80 which are of much higher premiums. Please help a virgin option trader. Is there a downside?

Jackson Diza

Sang asked:


I wrote a covered call in Nov 2008 and it expired in Jan 2009. Do I file the gain for 2008 tax or for 2009. Tax software complains when I enter the sold date in 2009.

Thanks

Maxie Mastriano

AJM asked:


I thought I had read a while back about a type of humaniod Japanese demon that has claws and fangs that is sometimes depicted as being covered in tattoos. Has anyone heard of this and know what it might be called?

Betty