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Showing results for tags 'covered calls'.
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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)