Personal Finance & Money Stack Exchange
Personal Finance & Money Stack Exchange

Questions tagged [covered-call-writing]

A covered call is an options strategy where an investor holds a long position in an asset and writes (sells) call options on that asset to generate an income stream. A covered call is also known as a "buy-write".

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Why do people exercise call options at a loss?

I sold some call options for $2.55 premium at strike price of $130. At expiration, the market price was $130.55. I thought the option was not deep in the money and at a loss of $2, hence I didn't buy to close. On Monday, I found out the option was…
fundmakesell
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How are proceeds from writing covered calls taxed?

When I sell call options based on an underlying security that I own (covered call writing), how are the proceeds treated fro tax purposes? As ordinary income? As a short-term capital gain? Is taxation of the option proceeds affected by how long…
Tony the Pony
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Why would someone want to sell call options?

I'm having trouble understanding why someone would want to sell call options. For example, if the writer of a call option owned the shares and they expected the share price to fall, why wouldn't they just sell their shares instead of selling call…
Alain
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When writing a covered call, what's the difference between a "net debit" and a "net credit"?

My brokerage account (Fidelity) gives me two choices when writing a covered call: net debit and net credit. What's the difference between these two choices? For example, take DRRX (share price $1.4). I can buy/write to open a covered call position…
Michael A
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Whats the difference between a qualified and an unqualified covered call?

I own various shares that I want to start writing covered calls on but I've heard about differences between "qualified" and "unqualified" covered calls. What's the difference? All I can find is that qualified calls are out of money when written and…
Michael A
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How does the process of "assignment" work for in-the-money Options?

Consider the following scenario - I have a covered call for XYZ for this month's expiration as XYZ May 18 25 Call. On May 18, XYZ is trading for $28, with the option listed above at $3.3. If I unwind my position, I will garner $28-$3.3 = $24.7…
rs79
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When should a covered call option be bought back to avoid assignment

I am trying to learn options. I sold a covered call (weekly option) that will expire on October 25th and I want to avoid being assigned. Should I buy it back on 24th (one day early) or can it be bought back on the 25th (the day of expiration)?
Raj
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Price of a call at expiration

I have a covered call that is going to expire in 15 minutes. It's $1.30 in the money. I'd expect with no time value left, the price to equal the intrinsic value ($1.30). However, it's still valued at $2.05. Is the volatility (vega) playing that…
Fueled By Coffee
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How can I figure out when I'll be able to write call options of a stock?

I have a 200 Zynga shares. I'm wondering when I'll be able to write call options? I see Groupon has options on it, but Pandora does not, so it seems it must not be just time.
David Silva Smith
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Taxing Capital Gains in an Earlier Year

I know I will have a large $70,000 capital gain in the beginning of 2020 (due to my selling deep-in-the-money covered calls which will expire, and therefore get exercised, in January). Would the IRS allow me to claim part of this gain in 2019…
bobuhito
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I sold call options that expired ITM. Why were they not exercised?

I sold two covered call positions that expired Aug 9. Both expired ITM. The 1st one's strike price was $3.00. At expiration, the stock was $3.13 so 13 cents ITM (6 contracts). The 2nd one's strike price was $184.50. At expiration, the stock was…
SlavkaStack
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How are option contracts assigned?

If I'm short a call, and the contra exercises their option, how is that assignment tracked back to me? Is the other side of my contract tied to a specific buyer? How does the OCC know to assign my specific contract?
Fueled By Coffee
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What is the rationale behind brokerages establishing tiers/levels for options trading?

I'll preface this by saying that my experience in this field is limited, so bear with any abuses of terminology. I understand the rationale behind FINRA's "Know your customer" and suitability rules for certain account privileges (e.g., trading…
jonsca
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What is a good price to "Roll" a Covered Call?

For an already initiated Covered Call, I wanted to ask if there is an optimal price to roll? For instance, if I buy/write a stock worth $10 with a strike price of $12, I can be faced with 3 scenarios as time progresses: The price of X will be less…
rs79
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Stock Trading Question - Covered Calls

My understanding of covered calls is that if I sell call options for a stock that I own and the price of the stock rises, I would have to sell my shares. What stops me from putting a limit buy order at the strike price of the options I have sold?…
CuriousGuy75
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