I am new to option market. Please help.
Last week, the stock went straight up. Instead of shorting it, I sold the call option (say 10 calls). Today (few days before the expiration), the stock price drops back down, so does call option. I don't hold any of that stock.
What should I do now? buy back the calls to cover? or buy the real stock at this lower price?
Thanks
2007-01-17 03:52:48 · 5 answers · asked by help_please 2 in Business & Finance ➔ Investing
If you are in US you don't have to do anything. If on expiration the price is below the strike you will get to pocket all the premium you received in writing.
Also, you could have bought some put options when you wrote calls, then it would have been a real short in stocks which is also called synthetic option short.
2007-01-17 05:18:19 · answer #1 · answered by Mathew C 5 · 1⤊ 0⤋
That depends which american options you shorted, you shorted the call options, when the buyer exercise it, you must sell the underlying asset to the buyer at the strike price. If you shorted the put option, meaning when the buyer exercise it, you are obligated to buy the underlying asset or the stocks at the strike price where you sell the put options. Yes you would not have any idea who buy your options and you don't have to know? Why would you want to know for anyway? Well if you short the american options, you can still hold it to expiration provided it is out of the money during the expiration. If it is in the money the exchange will exercise the options automatically and you are to meet any obligation arises from that exercise. Hope this help you understand better about options
2016-05-24 00:13:41 · answer #2 · answered by Charmaine 4 · 0⤊ 0⤋
If, like you say, you are "new to option market", you are probably lying about your trading. Because no brokerage firm would approve an inexperienced trader to sell naked calls. And even for experienced traders B/Ds typically requires a minimum of $1,000,000 account equity to sell naked calls.
Why don't you ask about something that might actually apply to you?
2007-01-17 04:40:10 · answer #3 · answered by Ivar 4 · 0⤊ 1⤋
Buy calls to cover. Then promise that you'll never do this again, until you learn how the market works.
2007-01-17 04:05:36 · answer #4 · answered by anywherebuttexas 6 · 0⤊ 1⤋
It sounds like you have no Idea what you are doing.
You should not play this market.
Do whatever you have to do to cut your losses, get out of this market, and concentrate on a more conventional, conservative type of investing.
2007-01-17 04:03:45 · answer #5 · answered by bob shark 7 · 0⤊ 1⤋