Doc,
Go to
cboe.pcquote.com
and take a look at the different options available...
calls on the left (betting the stock will go up)
puts on the right (betting the stock will go down)
Options are kind of like bets....some one is betting you that the
stock will go up/down.
Writing covered calls would be you, as the stock holder, betting someone else that the stock won't go up, and the give you x dollars betting that it will.
Selling puts is much more complex.
Hope this simple, yet, experienced (yes, have lost $ on all these)
information helps!
RichieH
You will see the open interest in a column, this refers to the number of contracts at that particular strike price. If the security falls very close to that particular strike price on the 3rd friday of that month, then the open interest at that strike price expires worthless. In other words, whoever wrote the covered calls pockets the money.
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