Oh, and you're so very welcome... I tried to make it brief, so I left some things out which are also as important to understand, but you could always ask questions and you'll likely figure some out anyhow if you decide to take that route...
For example... what if AGQ is at 215 and you write a 215 call for the 18.40 points and then AGQ rallies to 300 next week... in that case, you still keep the 18.40 points, that belongs to you on the day you wrote it... if AGQ is at 215 and you write the 215 call for 18.40, this means you sold the AGQ 18.40 points above 215, that's your profit, the rest belongs to the buyer... the buyer was in it for the increased value of the option, he first breaks even at 215 plus 18.40 or at 233.40... you're in the trade to make the guaranteed time premium no matter what the market does, it's less money but it's guaranteed your money no matter whether the market rallies, goes sideways, or down... he bought the call for the possible rally in the ETF, you wrote it for the time premium,, he bought the stock option with no guarantee the stock will rally, you sold the time premium with a 100% guarantee the money is yours the moment you sold it... talk about easy money...<g>
GZ |
