Can you explain how selling options like covered calls works? Is it possible to lose money by selling them?
>>59599105>is it possible to lose money options trading You’re about to find out
>>59599126Huh? I haven't sold any yet but I see people making like a couple hundred a day selling ccs. What's the risk?
>>595991332 risks:1/ Your shares go up and you now have to sell them which is inconvenient, and of course you dont get the present value but whatever you agreed. So not really a risk.2/ An actual risk is that the shares go down, so now you lose money the same as normal. And whatever options you write now will generate lessIf it suits someone, it looks likes a good option, no pun intended
>>59599105Read the book "Options as a Strategic Investment" by McMillan - you can find one before the current edition on pirate sites (the only difference between the previous and new is that the new covers VIX)The way that you can lose money selling covered calls is if your stock falls much more than the premium you collect from the saleFor example, you have 100 shares of AAPL (currently worth $23,328) you sell a covered call for $500AAPL shares fall 5% -- your $23,328 is now worth $22,161 -- the call you sold expires worthless, you keep the $500 in premium, but because the shares fell you end up losing $23,328 - $22,161 = $1,167 -- plus the $500 premium gain, so you lost $667 on the tradeThere is nothing wrong with selling covered calls,, it is extremely helpful in lowering your cost basis -- you can also use selling ITM covered calls to defer your gains to future tax years while locking in gains nowIt is not "free money" however, you are exposed to 100 shares of whatever stock worth of riskI highly recommend reading the book before you begin trading optionsYou can also sign up for Schwab, download thinkorswim, deposit $500 to enable live prices (and immediately withdraw the $500) and you can practice on thinkorswim paper trading, it is by far the best paper trading simulator for options, where it's all based on actual live prices and volume where you won't get a paper trade fill unless it would have actually filled in real trading
>>59599179Thanks. What if I change my mind about selling the shares at the strike price if it hits? Do I just buy a similar contract from someone else?>>59599245Thanks il look into it.
>>59599245>you can also use selling ITM covered calls to defer your gains to future tax years while locking in gains nowI'm having trouble understanding this. God I wish I weren't retarded
>>59599270look up the 'wheel system'. I havent done this myself but there are lots of YT vids on it.
>>59599277Let's say that it was December, if you wanted to sell your stock then your tax bill would be due in AprilSo instead of selling your stock and realizing the gain immediately, you could sell an ITM covered call (example: AAPL at $230 a share, you sell a covered call at $150 strike price for $85 [$850] for January) You would be essentially selling your shares for $235 each, as it's virtually guaranteed barring a meteor hitting the Earth that the call you sold will be exercised, that your shares will be bought for $150 each plus you keeping the $85 a share premiumYou are locking in the sale, where if the stock fell you still have the $85 premium and they're being bought for $150 each then in January, the buyer of the call exercises it and buys the shares from you - you were able to lock in the gains in December, but the transaction doesn't complete until January, so now your tax bill on the gains isn't due until April 2026This is a more advanced strategy, where I wouldn't worry too much about it while you are learning
>>59599309Oh wow ok I see now. That makes sense. Good stuff thanks
>>59599105Selling covered calls slightly reduces potential downside but also upside. You can't lose any more doing so.Say you sold calls before a stock moons. You lose out on upside if someone exercises, but if you sell a call before a stock dumps, your loss on the shares you hold is slightly offset by the premium you earned on the call. If you sell a call and the stock crabs, you make slightly more than you would if you hadn't sold calls because the premium is just free money.
