Take premium, keep stock
Take premium, sell stock at strike if called.
Buy back call at lower price to make profit
The covered call will profit from the stock's moving up, staying flat, or falling no more than the credit from the sold call. The position will lose as the stock price moves down beyond the amount of the credit.
Breakeven = starting stock price – premium received
The maximum gain is realized if the stock price is at the strike price. At that point, the full value of the sold call is retained while the stock has achieved its maximum without assignment. If the stock takes off and moves beyond the strike price sold, the position will not partake in those gains. If the stock price is above the strike price at expiration, you will be assigned.
You have a position with positive theta and so every day you are profiting from time decay (all else held equal). Time decay is the greatest in the front month.
How many ways do I make money off of a selling a covered call. I thought I'd make money either just by
1) get a premium and keep my stock or
2) get a premium and then make money selling the stock at a higher strike price if it gets assigned.
or
3) get a premium and lose money on the stock if it falls hopefully not too much lower than the price I bought it at
Can I also make money by getting a premium and then if the stock starts falling too much I also make a profit when I BUY TO CLOSE the bid-ask price? Just like when you short a stock.
I want to sell 2 covered calls on the stock CHTP which is trading at $4.94. I'd sell two FEBURARY 14th $6 calls which has a .75c and .80c bid -ask. So when I buy 200 shares of the stock at $4.94 sometime tomorrow (or maybe lower since it's falling) I instantly get $150 in premium. Then if the stock rises back up and doesn't go past $6 by next friday I made $150 in premium and keep my stock investment. OR. I instantly get $150 premium and if the stock flies past $6 by next friday I made $150 in premium and an extra $200 selling my stock at $6. OR if it falls CAN I just SELL TO CLOSE at the lower bid ask price and make money that way too?. Then either keep my stock and wait for it to rise back up or sell it.
Did I get that right?
