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)

Hello I am new to this forum and just trying to learn about options, so my questions are basic There is a saying 'the house never loses' (e.g. casino) why because they have a greater than 50% chance compared to the customer e.g. 54.5% casino 45.5% customer Therefore if I think about this logically a stock option is a derivative of the under laying stock so I have the same change of getting it right buying options as I do buying the underlying stock. So lets assume I pick stocks at random that would give me a 50% change or getting it right (like flipping a coin) However, options have an expiry date, which I believe means when they expire they are worthless Therefore it looks to me like I have a less than 50% change or getting it right with buying options e.g. I have two things against me (1) 50% change of choosing the wrong stock (or in this case call or put option) and (2) time e.g. my option is eroding in value in line with time. So two things against me and one thing for me = less than 50% chance of getting it right, is that correct ? if that above is logical (makes mathematical sense), why not just buy the stock ? for example if I buy the stock at $100 per share and it goes down to $80 I have lost $20 (e.g. not my whole investment) but if an option expires and it is not sold (or can you always sell an option regardless of market conditions) I lose it all. Whereas with a stock I could hold for as many years as I like and chose the time I want to sell (I am not constrained by time e.g forced into a buy or sell because time is running out)., is that correct ? or can I use the fact time is running out on my option to my advantage somehow ? Thanks very much, I know these are basic questions but would appreciate some help to get me started learning CXMelga

Hello All, I am brand new to options so just starting to learn, can someone please help me with the following question. I realise these questions may seem stupid to an experienced options trader, but will all have to start somewhere I understand an option has a time limit e.g. will expire in X days from date of purchase. So, let's say I purchase a call option for stock ABC at $100 and the option has a 30 days life time. Now lets assume ABC stock is trading at $200 in 20 days time What are my options here, in other words can I exercise the actual option and buy the underlying share for $100 each (e.g. 100 shares at $100 = $1000, but the shares I end up with are worth $2000 right now), or is that not the point of options trading and you never actually buy the underlying asset ? Or (depending on the answer to the above question) Can I sell the option itself (never actually exercising the option to buy the share) giving someone else the option to buy stock ABC at $100 a share (at least for the next 10 days until the option runs out) ? if I could/did sell the option as above, I assume the option I purchased would have some value (e.g. attractive to a would be buyer) as it gives them the right to buy something at a discount, correct ? What happens as the option gets closer to its expiry date (most things in life become less valuable as they approach their expiry date), so for example assuming ABC stock stays at $200 per share for the last 10 days of my options life. If I sell my option on day 21 will I get more for it than if I sell it on day 29 ? Thanks all CXMelga