I have 200 shares long of HD at 43 3/8 and 100 shares long HD at 41 1/8. I want to sell 3 contracts HD Aug 40 call paying 2 1/4 points premium. Stock close at 40 5/8 bid. What would happen if I did that tomorrow morning? Would my long get called right away?
Probably not, as there is still 1 5/8 premium in the Aug 40 call.
Since this call gives the buyer the right to buy HD at 40, it has
5/8 intrinsic value, and 1 5/8 time/volatility value.
I want to get out of the stock market fast. It's not for me.
The only fast, sure way to get out of your HD position is to sell the
stock. You may take a loss, but the loss may be greater if you wait.
(Of course, you could wind up with a profit if you wait, too. I am
not suggesting that you should sell HD, just that it is what you
should do if you think it will probably drop further, and want out
of the position.)
I am losing about $550.00 on the long so the 2 1/4 premium would give me 675.00 and get my loses back fast. Am I reading this right?
No. the premium obtained will give you a lower cost basis, but your
position will still be exposed until the call option expires, which is
Aug 21. Technically, the stock could get called from you earlier, but
this is unlikely.
And if the stock open at 40 5/8 does it get called at the market price or does it get called at $40.00 even though market price is 40 5/8 ? Thanks
If and when the stock is called away, $40/share is deposited in your
account. If HD were to close at $40 or lower on Aug 21, you would
still have the stock.
Good luck,
Zach |
