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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Trebor who wrote (1843)10/27/1998 7:45:00 AM
From: MrGreenJeans  Read Replies (2) of 15132
 
Incorrect Mr. Rice

Calls are normally priced at $2.50 increments

Not so. Call incremental prices are based on the price of the underlying. They are generally priced at $2.5, $5, or $10 or more depending solely on the price of the underlying (stock).

thus a January call will be worth more than a Dec.

At the same strike everything else being equal.

Call options expire the 3rd Friday of the month

Absolutely not! They stop trading the third Friday of the month but they expire the Saturday after the 3rd Friday of the month.

If the stock exceeds the strike price by the expiration date, your stock will be "called" away

There have been instances where the stock has been called away even when it did not exceed the strike price by expiration. Speculators in an attempt to manipulate markets often exercise worthless calls in an effort to move the price of the underlying. I refer you to the silver market during the week of Easter in 1995.

UNLESS you chose to buy back your call, which you can do at any time prior to the expiration date

If you are assigned first you cannot buy back the call.

covered calls are more or less risk free

Opportunity cost is a real risk.

My advice to those interested in options is to start by reading "Options as a Strategic Investment" by McMillian. It is the best book out there.
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