Options for Newbies -(Help Me Obi-Wan-Kenobe) Message Board

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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)

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To: Robert V. Cavaleri who wrote (2028)	1/10/2001 4:43:41 AM
From: RoseCampion	Read Replies (1) of 2241

Is being called out the same as simply selling the shares that you own, and you are left with the credit of the call ($1225.25) plus the proceeds of the stock from 10 to 15 on 700 shares ($10500) minus the margin debit ($2000) = $9725.25? Yes. Margin is irrelevant to mechanics or profit of the covered call and/or the 'forced' sale due to option assignment. It's no different than if you borrowed the $2K from your Visa card to finance the purchase of the original 700 shares. -Rose- PS that being said...writing a covered call will affect the amount of margin you have available in your account should the underlying equity rise above the call's strike price...if the underlying stock goes to 20 but you've already covered it with a $15 strike call, you don't get any extra marginability from the increased value above of the stock above $15 (since your broker assumes you're going to get called out at $15, it would be foolish to extend you more credit than that).

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