Options question

Chime
azgfbwkg

Go to company page Chime

azgfbwkg
Nov 22, 2021 17 Comments

I get a notification from robinhood that confuses me. So, here’s what I have done. I bought covered calls for NVDA at $1.36 expiring on nov 26th. This means I got $136 credited immediately. So, far everything is clear.

Now, I keep getting these random push notifications from robinhood that the call I purchased has gone down by 10%, gone up by 15%, etc. etc. Am I actually losing any money here? I just want the option to expire on nov 26th. Therefore I’m guessing that fluctuation of the call doesn’t matter to me (as long as the stock price doesn’t come close to my call price). Am I right?

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TOP 17 Comments
  • Intuit
    fomo

    Go to company page Intuit

    fomo
    You mean you sold covered call? I guess either you own 100 stocks of NVDA or leap option of NVDA. If you sold a covered call and got the premium credited, you don't need to worry until the price is lower than the strike price of your option. If it comes up to the strike price of your option your shares will be sold at expiration unless you buy back the option.
    Nov 22, 2021 5
  • Aptiv
    adassss

    Go to company page Aptiv

    adassss
    Second, if you BOUGHT a call, and is up 10%, then you can sell it for a 10% profit. If it is down 10% then you're now at a loss of 10%.

    If you SOLD a covered call and the call is now worth 10% more meaning if you buy it back you pay 10% more (hence 10% loss). If it is 10% less then you can buy it back for 10% cheaper and you make a 10% profit.

    You buy a call if you're bullish on the stock, you sell a covered call if you're long term bullish but wanna make some money in the interim when you feel stock price will go down. You sell a naked call (no collateral) if you're extremely bearish on the stock and are 100% sure the buyer won't exercise the call and it will expire worthless.
    Nov 22, 2021 4
    • Aptiv
      adassss

      Go to company page Aptiv

      adassss
      OP, please Google these phrases:

      Sell a naked call
      Sell a covered call
      Buy a call
      Buy a put

      There's no such thing as buying a covered call. So many people have told you that so many times but you keep using that phrase. It's almost as if you don't wanna READ.

      Investopedia has good examples.
      Nov 22, 2021
    • Chime
      azgfbwkg

      Go to company page Chime

      azgfbwkg
      OP
      Ok, now I get it. I will look at investopedia. Thanks
      Nov 22, 2021
  • Broadcom Ltd. / R&D
    hdhrs

    Go to company page Broadcom Ltd. R&D

    hdhrs
    How do you buy a covered call without selling it first ? Do you own NVDA stocks ? Did you mean you bought call option. Here max loss the money you paid to buy the option. Max profit is unlimited , depends on NVDA price and your strike price.
    Nov 22, 2021 2
    • Chime
      azgfbwkg

      Go to company page Chime

      azgfbwkg
      OP
      Reading some articles and the comments here, I should say the following. I have 100+ stocks of nvda and I sold covered calls with nov 26th expiry at $365 strike price at $1.36 per contract
      Nov 22, 2021
    • Broadcom Ltd. / R&D
      hdhrs

      Go to company page Broadcom Ltd. R&D

      hdhrs
      As of todays close its worth 25c. It won’t as high as 2.36 today. You will keep the $136 if stock ends before $365 by end of this trading week.
      Nov 22, 2021
  • Apple
    DNYz02

    Go to company page Apple

    DNYz02
    Why are you trading options if you have no idea what those notifications mean?
    Nov 22, 2021 1
  • Aptiv
    adassss

    Go to company page Aptiv

    adassss
    If you bought a call you paid 136. If you let that call expire worthless you're out of 136.

    I think you sold a covered call.
    Nov 22, 2021 0