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Technology Stocks : Dell Technologies Inc.
DELL 128.33+1.4%1:33 PM EST
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To: Byron Xiao who wrote (75919)10/30/1998 5:39:00 PM
From: FR1  Read Replies (1) of 176387
 
I am thinking about selling the Dec 70 calls. But I don't know where to find the price for that and whether my broker, Datek Online lets me sell only 5 contracts?

As you can see, I am still not clear on options trading. Suppose DELL reaches 70 before the 3rd Friday of Dec, I get a call. Suppose I sell the Dec 70 options at $2 now, does that mean that my actual selling price is $72? What if I decide to keep the stocks when the $70 price strikes? Do I have to pay anything? Thanks.

You can sell covered calls on as many contracts as you want starting with one. Each contract, of course, is 100 shares so you have 5 contracts you can sell.

Let's take your example:
1) You will get $2 x 500 = $1,000 (minus brokerage fees) put into your account as soon as you sell 5 covered call contracts.

2) Suppose the stock goes well over $70 a share anytime between now and 3rd week of DEC. Then the person that bought your contracts will put 500 x $70 = $35,000 in your account and the shares are his.

That, it! The idea is that you are limiting your possible profit. Selling covered calls is a good idea if you think the stock will go down or it will never reach $70/share by 3rd week of Dec.

Oh yeah, if the stock goes up and approaches $70/share and you want to keep the stock, then you can buy back your calls but you will have to pay whatever the calls sell for at the time (probably much more than $2/share).
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