Basic question on selling 'covered calls'

[CXMelga]

 

I am a beginner and staring to learn about options, I have a question about  selling covered calls and would be grateful if someone could help me understand it please

If I have an online broker that deals in equities./stokes but not options (lets calls this broker B1),  then I have another online broker who deals with Options but not equities/stoke  (lets call this broker B2)

So I buy 100 shares in XYZ copr from B1,  and XZY stock is trading at $50 per share (so I pay approximately $5,000)

I then go to broker B2 and sell a call option (covered call as I own XZY) on XYZ at a strike price of $60 per share therefore 1 contract is for $6000 at what every premium I get

Now the holder of the option exercises his option so it is assigned to me, but my Stock is held with a separate broker so how does the option get tied back to 'my particular share holding' that I already have'   ?
or does it not actually work like that and in essence I just need to give the buyer who exercised the option 'the money'  (rather than the actual shares) at the current market value so he/she can go buy the stoke right now on the open market at the current price ? (or should that be I have to give him/her the difference in price between the strike price and current market price, rather than the full market price)

If I have to give the person who exercised the option the money (as above), than as I see it this leaves me with two choices going forward, either sell my  shares at the current market price to get back the money I just paid out (minus fees) or carry on holding on to my shares in case it goes up even more ?

I would be very grateful if someone could help me understand how the above all fits together when it comes to covered calls.

 

Thanks

CXMelga (Charlie)

 

[Kim]

Broker B2 doesn't know that you hold 100 shares with another broker, so he will see the calls as naked. Assuming you have permissions to sell naked calls, he will also require fairly large margin for naked calls position. And if you are assigned, you will be short 100 shares in broker B2 account.

Why complicate things? There are more than enough brokers today that trade stocks and options.

[Guest CXMelga]

Hello Kim,

Thanks very much for taking the time to reply, much appreciated, and your explanation is very clear

I am new, and while looking at a few brokers online I saw one that dealt with stock but not options and another the other way around.

Can you suggest one or two online brokers with low charges where I can buy/sell both shares and options please?

Thanks very much

CXMelga 

[Kim]

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