I am learning option trading. I did sell call on Shopify for 145$ which expires this Friday. As part of that I received some premium and if doesn’t go to 145, I keep my stocks and the premium as well. This part I am clear, but why does Robinhood shows the value of gain / loss on the contract itself. I don’t get it. Attached in screenshot. The thing is end of the day, I get the premium that’s originally showed while entering into contract no matter of what but I am curious how this info is helpful. I can see the if it shows losses on the contract, that means the stock has potential to reach at the contract price (145) and vice Versa but don’t know why they show it as loss and gain.
You should be VERY VERY careful with options it is not like trading equities. Very easy to lose ALOT of money if you screw up or dont understand it completely.
Trading options is akin to gambling. You will realize I’m right in a year and you’ve lost all your play money.
It's really about how you use it. There are strategies that reduce risk rather than increase it..
+1 - I invested a lot of time into learning options. Only sold high POP vertical spreads for high premium, and quickly realized even risk reduction strategies are pure gambling in the world of options.
When you sell to open a Call (hoping the price goes down) vs. a particular strick price (145), you get the premium no matter what happens. If the stock trades below the strick price you keep your stock. If it trades above the strick price, the buyer of your call has the option to exercise his call and buy shares at the strick price. You must sell them to him no matter what but get to keep your premium no matter what. Here it shows you sold 1 call contract, which is equivalent to 100 shares of Shop. You sold it and the buyer was willing to pay you a max premium of $1.35 per share, I.E. your max premium to keep will be ($135=$1.35 per share x 100 shares) if the price of SHOP on 11/2 is below $145. Currently the price of SHOP is below $145, but, the current price of the call option you sold still has a value of 0.23 cents or ($23=.23x100shares). Basically this means you could sell another call and others in the market are willing to pay 0.23 cents for it. This is the same exact call you have. So if you wanted to close your position and take your $112 (135-23) current value of the option you sold, you could buy a call to close your call which is outstanding. Effectively getting rid of your option. You might do it if you think tomorrow SHOP will go to 155, therefore taking out all of your gains. Basically this view is showing the cost of the same option you sold to someone x days ago, but at today premium. If the market thought the stock price would go to $155 the .23 cents would be much higher for his option.
Also, you don't need to sell your shares, if the price goes above 145, you can simply buy a call to cover your call, keeping your investment, the premium, but will have to pay the equivalent amount for the option as you would have for the stock, as the option will price in the delta between the stock price and strick price. I know it's confusing, but just think of everything as separate contracts with their own prices. These prices do change based on the stock price.
Yeah I think I got it. Thank you for your time and for detailed comment.
Don’t ask these questions and trade options!!!! You can literally loose your house. Learn options thoroughly before even fucking with them, and don’t even get put options without cover unless you know what you’re doing.
Yeah I am doing exactly only the part that I am clear of. “Sell call” is something I completely get it. As in this case, I really meant to sell for 145 if it really goes, even if it doesn’t I am fine holding it. So playing with full sense. I just wanted to understand on exact profit/loss on the actual contract itself. Looks like the prior comments helped me on what it means.
Stop fear mongering. Ask questions and learn. Just be careful when selling uncovered options. Read up on Greeks of options and look up common strategies and understand them
OP read up on time decay , options trading is very risky even for experienced folks
Hmm but in this scenario if I am really willing to sell for 145 and willing to hold even if it goes down. What risk we are talking? Or you meant in general?
In general
I would be VERY careful about selling naked options as you have an unlimited loss potential. Covered calls are fine.
Hmm but in this scenario if I am really willing to sell for 145 and willing to hold even if it goes down. What risk we are talking? Or you meant in general?
Selling naked calls is usually not enabled for newbies by many brokers.
So the Friday closing price was : 145.55 and I was assigned to sell but today it came down by 4-5 points. Though it was good for me, am not sure how was it benefit from the buyer who asked me to execute. Because 1) I was paid premium of 130. So the cost basis is 146.3. Not really a profit for them 2) On Friday, it was actually traded at 148+. I guess they could have executed on Friday itself. Is there restriction from brokerage that they can’t exercise the contract until market close? 3) last but not least, they could have purchased that in the direct market itself instead of executing contract. Asking these questions because I am exploring buying call in next iteration.
I would like to learn options trading as well. Can you folks share some good resources? Thanks!
It’s so fucking straightforward, lyft must hire idiots
Stfu capital one. If you can’t be of help then gtfo from here or stay silent