I am trying to understand options again. I own 800 shares of CSCO and it looks to be overbought. Earning are on exp day 2/13. (a no no for options) If I STO 8 contracts of CSCO Feb 13 $22 @ .26
1. It expires and I pocket $191.45 premium and keep stock.
2. It is called and I pocket $191.45 premium plus the stock appreciation if using today's close (21.15) would be ( the difference between 22 & 21.15=.85 * 800 sh = $680. So I pocket the $191.45 + $680?
3. I do not understand the roll out so maybe not a choice for me. Anyway I would be happy with scenario 1 or 2 if I have done the math correctly
Help or comments welcome Thanks Virginia
Paul Madison on
Virginia,
You have done great and do not need to worry about the roll.
I am trying to understand options again. I own 800 shares of CSCO and it looks to be overbought. Earning are on exp day 2/13. (a no no for options) If I STO 8 contracts of CSCO Feb 13 $22 @ .26
1. It expires and I pocket $191.45 premium and keep stock.
2. It is called and I pocket $191.45 premium plus the stock appreciation if using today's close (21.15) would be ( the difference between 22 & 21.15=.85 * 800 sh = $680. So I pocket the $191.45 + $680?
3. I do not understand the roll out so maybe not a choice for me. Anyway I would be happy with scenario 1 or 2 if I have done the math correctly
Help or comments welcome Thanks Virginia
Virginia K on
Ok thanks, but when I went to Scottrade to see if I could enter correctly, I got a different (confusing) set of options. I showed .01 for the Feb $22. So I checked option express and it showed the same as the broker. Yahoo finance still shows the numbers I was hoping to get. So wondering what happened?
Virginia
On Fri, Jan 25, 2013 at 5:10 PM, Paul Madison <madispa@gmail.com> wrote:
Virginia,
You have done great and do not need to worry about the roll.
I am trying to understand options again. I own 800 shares of CSCO and it looks to be overbought. Earning are on exp day 2/13. (a no no for options) If I STO 8 contracts of CSCO Feb 13 $22 @ .26
1. It expires and I pocket $191.45 premium and keep stock.
2. It is called and I pocket $191.45 premium plus the stock appreciation if using today's close (21.15) would be ( the difference between 22 & 21.15=.85 * 800 sh = $680. So I pocket the $191.45 + $680?
3. I do not understand the roll out so maybe not a choice for me. Anyway I would be happy with scenario 1 or 2 if I have done the math correctly
Help or comments welcome Thanks Virginia
Malcolm Myles on
Hi Virginia,
Sounds like you are considering writing the option and haven't
done it yet. I don't own CSCO and so I don't know its story that
well. It is hitting new highs that haven't been seen but three
times in the recent past (two year chart). Appears to be paying
dividends like ringing a bell however.
What else tells you it is time to liquidate your position? Do you
have another company that has better potential growth that you
would like to start a position? Why? You have a potential dividend
after earnings coming your way that needs some consideration.
If you write calls, and I've learned this in a challenging way,
you can get exercised regardless of your intentions. So assume
you will be going through scenario #2 on or near Feb 16 at $22 per
share. I think your calculation is correct IF you are comparing
writing the 22 call option vs selling the stock outright today.
However, you should look at your return on your stock position and
add the premium of $191 to that value and work out what your gain
will be. If that is a nice return and you have concerns about
locking in that return, then it sounds like a good trade.
Roll outs are when you have an option contract and you want to
extend it farther out... you roll the current option out to a new
date (BTC and STO in one transaction).
Thank you for sharing, hope it goes well for you and have fun!
Because you will either continue to have 800 shares of CSCO or a
lot of cash to invest... win win!
Malcolm
On 1/25/2013 2:46 PM, Virginia K wrote:
Hello cool club,
I am trying to understand options again. I own 800 shares of CSCO
and it looks to be overbought. Earning are on exp day 2/13. (a no
no for options)
If I STO 8 contracts of CSCO Feb 13 $22 @ .26
1. It expires and I pocket $191.45 premium and keep stock.
2. It is called and I pocket $191.45 premium plus the stock
appreciation if using today's close (21.15) would be ( the
difference between 22 & 21.15=.85 * 800 sh = $680. So I
pocket the $191.45 + $680?
3. I do not understand the roll out so maybe not a choice for me.
Anyway I would be happy with scenario 1 or 2 if I have done the
math correctly
Help or comments welcome
Thanks
Virginia
Malcolm Myles on
Check your dates:
13-02-01 22.00 C is 0.1
13-02-22 22.00 C is 0.25
CSCO has weekly options I think.
M
On 1/25/2013 3:58 PM, Virginia K wrote:
Ok thanks, but when I went to Scottrade to see if I
could enter correctly, I got a different (confusing) set of
options. I showed .01 for the Feb $22. So I checked option
express and it showed the same as the broker. Yahoo finance still
shows the numbers I was hoping to get. So wondering what
happened?
Virginia
On Fri, Jan 25, 2013 at 5:10 PM, Paul
Madison <madispa@gmail.com>
wrote:
Virginia,
You have done great and do not need to worry
about the roll.
I am trying to understand options again. I own 800 shares
of CSCO and it looks to be overbought. Earning are on exp
day 2/13. (a no no for options)
If I STO 8 contracts of CSCO Feb 13 $22 @ .26
1. It expires and I pocket $191.45 premium and keep stock.
2. It is called and I pocket $191.45 premium plus the
stock appreciation if using today's close (21.15) would be
( the difference between 22 & 21.15=.85 * 800 sh =
$680. So I pocket the $191.45 + $680?
3. I do not understand the roll out so maybe not a choice
for me. Anyway I would be happy with scenario 1 or 2 if I
have done the math correctly
Help or comments welcome
Thanks
Virginia
Virginia K on
Thanks for your reply and gives me more to consider. I've held 400 sh for 2 yrs and the other 400 for 4 months. I tend to hold too long and end up with a loss so yes I am trying to lock in an 11% gain at this point.
After rechecking I discovered I was looking at the weekly options, and finally found the Feb 15 expiration. Not sure why yahoo does not show the weekly. Another consideration is that the market is overbought, I know this can go on for awhile but I am nervous about losing the gains thus far.
Thanks again for your input, I do plan to put this trade on. Let you know how it turns out. Virginia
On Fri, Jan 25, 2013 at 6:24 PM, Malcolm Myles <malcolm@mmyles.com> wrote:
Hi Virginia,
Sounds like you are considering writing the option and haven't
done it yet. I don't own CSCO and so I don't know its story that
well. It is hitting new highs that haven't been seen but three
times in the recent past (two year chart). Appears to be paying
dividends like ringing a bell however.
What else tells you it is time to liquidate your position? Do you
have another company that has better potential growth that you
would like to start a position? Why? You have a potential dividend
after earnings coming your way that needs some consideration.
If you write calls, and I've learned this in a challenging way,
you can get exercised regardless of your intentions. So assume
you will be going through scenario #2 on or near Feb 16 at $22 per
share. I think your calculation is correct IF you are comparing
writing the 22 call option vs selling the stock outright today.
However, you should look at your return on your stock position and
add the premium of $191 to that value and work out what your gain
will be. If that is a nice return and you have concerns about
locking in that return, then it sounds like a good trade.
Roll outs are when you have an option contract and you want to
extend it farther out... you roll the current option out to a new
date (BTC and STO in one transaction).
Thank you for sharing, hope it goes well for you and have fun!
Because you will either continue to have 800 shares of CSCO or a
lot of cash to invest... win win!
Malcolm
On 1/25/2013 2:46 PM, Virginia K wrote:
Hello cool club,
I am trying to understand options again. I own 800 shares of CSCO
and it looks to be overbought. Earning are on exp day 2/13. (a no
no for options)
If I STO 8 contracts of CSCO Feb 13 $22 @ .26
1. It expires and I pocket $191.45 premium and keep stock.
2. It is called and I pocket $191.45 premium plus the stock
appreciation if using today's close (21.15) would be ( the
difference between 22 & 21.15=.85 * 800 sh = $680. So I
pocket the $191.45 + $680?
3. I do not understand the roll out so maybe not a choice for me.
Anyway I would be happy with scenario 1 or 2 if I have done the
math correctly