What will happen to my position if I write a covered call on a stock and it does not exercise?

Question

Will I get some kind of proceeds for having sold a covered call? Is it smart to write covered calls? Can I buy to close back my covered call and or do I need to do that when expiration takes place to get some sort of proceeds from it?

Answer 1

First, a short options position may of may not be assigned, but it cannot exercise. I am assuming you mean it is not assigned.

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You received a premium when you sold the call. That is yours to keep.

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Sometimes yes, sometimes no.

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You can close any short position at any time with a "buy to close" transaction if you want to. If the option is assigned or if the option expires it no longer exists, and since it no longer exists it can not be closed.

The only proceeds from the call itself were received at the time you sold it. You do not get anything additional at expiration. If the option is assigned, you will get the proceed from the sale of the stock at the time the stock is sold.

Answer 2

If it does not get assigned then the call you sold expires worthless and you keep your stock and the proceeds from the call your sold. So if you sold the call for $50 and it expires worthless you earned $50. You can buy to close the short call any time before it expires. Your profit (or loss) will be the difference between what you sold it for initially and the cost to purchase it back.

Answer 3

That's the benefit of writing covered calls, you keep the premium and the stock if it doesn't get called away. You don't have to buy the call back, it will expire and you don't have to do a thing. Now do it again to offset your cost for the stock. Good for you your on your way to some good profits.