The combination of the trade – purchasing the stock, plus selling the October 44 call – should cost you a total of less than $42.26
Using myself as an example, when I opened the trade my total cost was $42.28 –
Buy 100 shares at $43.25
Sell an Oct 44 call for $0.97
So with my example, if the XME price is above $44 per share by October expiration, then my shares get called away, and I get to keep the profit on the shares, plus the profit from selling the call – a total of ($0.97 + $0.75) * 100, or $172.00 (less commissions). If the shares do not get called away, then I still hold them at whatever price they are at, and I get to keep all of the profit from selling the call ($97.00).
If you sell the October 44 call, and the stock price rises above 44, your stock will get called away unless you buy the call back. It will not expire worthless if it is “in the money.”
I do not understand the 42.26 or better since the stock is over 43.
The combination of the trade – purchasing the stock, plus selling the October 44 call – should cost you a total of less than $42.26
Using myself as an example, when I opened the trade my total cost was $42.28 –
Buy 100 shares at $43.25
Sell an Oct 44 call for $0.97
So with my example, if the XME price is above $44 per share by October expiration, then my shares get called away, and I get to keep the profit on the shares, plus the profit from selling the call – a total of ($0.97 + $0.75) * 100, or $172.00 (less commissions). If the shares do not get called away, then I still hold them at whatever price they are at, and I get to keep all of the profit from selling the call ($97.00).
Buy selling the Oct 44 call, if the call is above 44 do i have to buy the 44 call back or does it expire worthless.
If you sell the October 44 call, and the stock price rises above 44, your stock will get called away unless you buy the call back. It will not expire worthless if it is “in the money.”
Why not buy the stock. Wait for the bounce and then sell out of the money? Isn’t time is on your side the longer you wait?
4% return on risk of $. 4228 or am I confused