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Stocks
- Thread starter Boots
- Start date
Depends on your strategy. Selling call options against stocks that I already own isn't. The main risk of this strategy is that if the stock takes off for the sky unexpectedly, I won't make as much. (and yes, I have had that happen.) Otherwise, it just brings in a little cash flow each month.
Whoever is buying the calls that I'm selling, is gambling ...
Options 101
A call option is the right to buy 100 shares of the underlying at or before a certain date (expiration) at a certain price. If you buy a call option, that's the position you are in. If you sell a call option, whoever is on the other end of the trade has the right to buy 100 shares from YOU at that price, at or before that date.
Now, obviously, that trade is only going to go forward if the option is "in the money", i.e. it makes no sense to exercise a $32 call option if you could simply buy the stock itself for $31; if the underlying is trading below the "strike price" of the call option then the call option is "out of the money" and if the underlying is trading above the strike price then it is "in the money".
So let's say company X shares are at $31 and I own some (let's say 100 shares ... options work in blocks of 100 shares). It's now April, and let's say the May $32 call options are trading at 50 cents. $32 is the "strike price", the third Friday in the month is "expiration".
Let's say I sell those $32 call options for 50 cents today. That 50 cents (per share) is money in my pocket. Then we let the trade ride, and see what happens.
Suppose the price wanders up and down but ends trading on Friday 15 May right where it is now, $31. It has gone nowhere. This is actually a rather high probability. It is below the strike price ($32) so the option expires worthless. I've made 50 cents a share (income) because I sold something (and I actually never had to buy it back, because it expired worthless). Whoever was on the other end of that trade ... lost everything (all 50 cents). But my net cost on those shares is now $30.50 because I paid $31 and sold 50 cents of options against them ...
Suppose the price goes down to $30.50. I break even compared to having waited until now to buy. But, I couldn't have known that was going to happen ...
Suppose the price goes down to $30. I'm in a loss position ... but only by 50 cents instead of the whole dollar.
That's if the price goes down. What if it goes up ...
If the price goes up to $31.99 (still below the strike price!) fantastic. I now own something worth $31.99 that I only paid $30.50 for.
If the price goes to $32.01 (above the strike price) then the option is now "in the money" and the shares get "called away" because I have sold the right to sell them for $32 as of expiration. This is okay, because selling something for $32 that I only paid $30.50 for is a win. Whoever is on the other end of the trade, pays the $32 to exercise the option and they also paid the 50 cents for the option in the first place. Not great on their end.
Where I lose (and the gambler on the other end of the trade wins) is if the price takes off. Let's say I misjudged how much something would take off, and it goes to $40. Obviously the option is in the money. I'm obligated to sell for $32 (remember that I paid $31 and sold the option for $0.50 so my cost was $30.50). That's a small win, but the big winner is whoever bought that option, because they can now exercise the option, buy my stock for $32, sell it for $40, and it only cost them 50 cents to do it.
Selling covered call options is (usually) a conservative income-earning position. Buying them is the gamble.
Selling UNcovered (naked) call options is a gamble (and unless you are a professional investor, you are not allowed to do it ... my account doesn't allow me to do this). In the example above, if the stock took off, but I had sold naked calls against it, I would really be in trouble, because now I would be obligated to BUY the stock for $40 to cover the short position that the forced sale at $32 at expiration would otherwise create.
Put options are the other way around, a put option is the right to sell shares at a certain price and on or before a certain date. The implications are a lot harder (for me) to understand ... and you cannot cover a position the way you can with call options ... and my simple way of dealing with this is that I simply do not mess with put options.
Dresden
Well-known member
CXV.V is falling. No credible news out there so I assume the initial jumper's are profit taking which is driving down the price. Not sure where it will go from here..
Currently:
Convalo Health International Corp. (CXV.V)
-TSXV
0.56
0.07(11.11%) 10:53AM EDT
Peaked at $0.82 on April 21st.
The RSI chart is a bit alarming as it has nosedived below 70.
Currently:
Convalo Health International Corp. (CXV.V)
-TSXV
0.56
Peaked at $0.82 on April 21st.
The RSI chart is a bit alarming as it has nosedived below 70.
Dresden
Well-known member
TNK still looking good as today!
CXV.V is falling. No credible news out there so I assume the initial jumper's are profit taking which is driving down the price. Not sure where it will go from here..
Currently:
Convalo Health International Corp. (CXV.V)
-TSXV
0.560.07(11.11%) 10:53AM EDT
Peaked at $0.82 on April 21st.
The RSI chart is a bit alarming as it has nosedived below 70.
Should've pulled out when I saw a 20% gain =(
油井緋色;2298699 said:
You'll likely do fine, holding on right now.
Convalo Health International, Corp. ("Convalo" or the "Company") (TSX VENTURE:CXV), an acquisition-oriented company focused on rolling up the US addiction rehabilitation market, is pleased to announce that it has closed its previously announced bought deal private placement offering (the "Offering"). Mackie Research Capital Corporation was lead underwriter and sole bookrunner on behalf of a syndicate of underwriters including Beacon Securities Limited (the "Underwriters"), whereby the Underwriters purchased 43,125,000 units (the "Units") of the Company at a price of $0.40 per Unit, for gross proceeds to the Company of $17,250,000, which included the full exercise of the over-allotment option of 5,625,000 Units.
The securities issued under the Offering are subject to a hold period which will expire four months and one day from the date of closing, being August 23, 2015. The net proceeds from the Offering will be used by Convalo for acquisition purposes and general working capital.
In consideration for their services, the Underwriters received a cash commission of 5.0% of the gross proceeds of the Offering, and have received such number of compensation options exercisable into Units, as is equal to 5.0% of the Units issued in the Offering.
SGY that was mentioned earlier in this thread had a big up day yesterday.
I had gotten out of part of my position earlier (with a decent gain). For the rest of my position, taking into account what I paid and what it has done so far, I decided that $4 was my "think about getting out" point. I had left a standing sell order for July $4 call options (with an ask price that was well above market at the time) - this was with the intent of taking advantage of any possible spike while I continue to work at my day job (which I still have to do, because I don't have enough in the game to retire). Yesterday was that day. So now, I'll own it until July, I'll collect a few months more dividends, then I'm out. Unless it goes back down ... which it might ... in which case, by selling those options, I've reduced my net cost, which is also fine with me. Or unless some other investor decides to exercise their call options early and mine get called away earlier. That is also fine with me.
Postponing bankruptcy, one small trade at a time
(thanks Gary)
I had gotten out of part of my position earlier (with a decent gain). For the rest of my position, taking into account what I paid and what it has done so far, I decided that $4 was my "think about getting out" point. I had left a standing sell order for July $4 call options (with an ask price that was well above market at the time) - this was with the intent of taking advantage of any possible spike while I continue to work at my day job (which I still have to do, because I don't have enough in the game to retire). Yesterday was that day. So now, I'll own it until July, I'll collect a few months more dividends, then I'm out. Unless it goes back down ... which it might ... in which case, by selling those options, I've reduced my net cost, which is also fine with me. Or unless some other investor decides to exercise their call options early and mine get called away earlier. That is also fine with me.
Postponing bankruptcy, one small trade at a time
(thanks Gary)
SweetOnion
Well-known member
Man, I need to go back and read that post about Calls about 5 more times. I have been trading on my own since late November 2012 and my Waterhouse account tells me that I have made 37.42%, 13.69% annualized, within my TFSA.. Although I personally feel I am pretty happy with this, I know it could be better... but what's even more concerning is the fact I have to go back a minimum of 5 more times to figure out what you guys are talking about.
I have been buying and selling the same stocks over and over... Royal Bank, BMO, TD, Leisureworld (LW), Whistler Blackcomb (WB) as well as a few others I currently don't own, like Enbridge Income Fund (ENF), Air Canada, Acadian Timber Corp (ADN) as well as Ford and Carnival in the US.
The Carnival shares I buy simply because they dividend for $100 per year, and also pays $100 in on board credit (Tax free, booya ) we cruise yearly so I make about 4% from those benefits...
All the Canadian securities are done within my TFSA, except for about 15-20 thousand I have in a regular account I will continue to top up my TFSA with until it runs out. All I have been doing is watching the peaks and valleys, and listening to the news (Especially back when the 13 trillion dollar debt counter was on all the time) it seemed like I could buy and sell, or double my investment and then sell 50-100% of it after I got back over my cost average, depending on how far away it was from it's 52 week high, or high since the 2008 crash.
I feel like I need to mix it up in the strategy though, as most of the stocks I have been watching are surfing their all time highs. I also have over 500 shares of Great West Life stock, which is the company I work for...
My Waterhouse account is not even set up to buy or sell Options. When I click it, it is unavailable...
if anyone has any good advice for me, lets have it.
I have been buying and selling the same stocks over and over... Royal Bank, BMO, TD, Leisureworld (LW), Whistler Blackcomb (WB) as well as a few others I currently don't own, like Enbridge Income Fund (ENF), Air Canada, Acadian Timber Corp (ADN) as well as Ford and Carnival in the US.
The Carnival shares I buy simply because they dividend for $100 per year, and also pays $100 in on board credit (Tax free, booya
) we cruise yearly so I make about 4% from those benefits... All the Canadian securities are done within my TFSA, except for about 15-20 thousand I have in a regular account I will continue to top up my TFSA with until it runs out. All I have been doing is watching the peaks and valleys, and listening to the news (Especially back when the 13 trillion dollar debt counter was on all the time) it seemed like I could buy and sell, or double my investment and then sell 50-100% of it after I got back over my cost average, depending on how far away it was from it's 52 week high, or high since the 2008 crash.
I feel like I need to mix it up in the strategy though, as most of the stocks I have been watching are surfing their all time highs. I also have over 500 shares of Great West Life stock, which is the company I work for...
My Waterhouse account is not even set up to buy or sell Options. When I click it, it is unavailable...
if anyone has any good advice for me, lets have it.
Dresden
Well-known member
CXV.V is falling. No credible news out there so I assume the initial jumper's are profit taking which is driving down the price. Not sure where it will go from here..
Currently:
Convalo Health International Corp. (CXV.V)
-TSXV
0.560.07(11.11%) 10:53AM EDT
Peaked at $0.82 on April 21st.
The RSI chart is a bit alarming as it has nosedived below 70.
Massive move up today.
[h=2]Convalo Health International Corp. (CXV.V)[/h] -TSXV
0.64
Any speculation on why it dropped?
buy your stock in lots (100)
Last edited:
It seems that with stocks that trade below $0.10 or so, you want to buy in lots of 1,000. I have 5,800 shares of MMJ, and the last 800 took forever to fill even though my limit order was at the ask. Luckily, I had set a GTD order 7 days into the future.
I don't use "all or nothing" but unless there is a pressing reason to do otherwise, I always use multiples of 100 shares. Doesn't always work ... there's always "that guy" who has three or seven shares to sell and you end up getting partially filled with those. If I'm placing "stink bids" I always specify a "good until" date that is the maximum allowed (30 days). If your order only gets partially filled today, just leave it sit, it could very well get filled tomorrow - or next week. And sometimes it just doesn't go your way. Just recently I placed an order for 200 of something and only got 10 ... and the price never came close again, so that's all I got!
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