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Zecco.com » General Investing » Options Trading » Writing a covered call with a limit...
Last post 05-18-2008, 2:14 AM by Stardust. 6 replies.
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  •  05-12-2008, 10:02 AM 28923

    Writing a covered call with a limit on stock price and limit on option price

    Reply Quote

    It seems that when you click on "Covered Call," you are given the option to place a limit price for the stock, but not for the option.

    Does that mean the option will be executed at the market price?  Don't they let you specify a limit price for the option, too?  There doesn't seem to be a box/field allowing that -- only one for the price of the stock.

  •  05-12-2008, 10:13 AM 28926 in reply to 28923

    Re: Writing a covered call with a limit on stock price and limit on option price

    Reply Quote
    I think Zecco treats this transaction as a buy/write.  In this case you only care about the stock price since they will immediately sell the call when the stock is bought.


    -Sean

  •  05-12-2008, 10:15 AM 28927 in reply to 28926

    Re: Writing a covered call with a limit on stock price and limit on option price

    Reply Quote
    One more thing.  If you want to set a limit on the stock AND the option sold, then you should put in an order to set a limit to buy the stock and once it's executed put in an order to sell the option at a limit price.

    -Sean

  •  05-12-2008, 11:58 AM 28935 in reply to 28927

    Re: Writing a covered call with a limit on stock price and limit on option price

    Reply Quote

    SeanK:
    One more thing.  If you want to set a limit on the stock AND the option sold, then you should put in an order to set a limit to buy the stock and once it's executed put in an order to sell the option at a limit price.

    Hi Sean!

    Yeah, but as I mentioned in the other thread, everytime I try to write a covered call on stock I already own, I get a rejection message.

  •  05-17-2008, 5:38 PM 29289 in reply to 28923

    Re: Writing a covered call with a limit on stock price and limit on option price

    Reply Quote
    The limit price is not for the stock alone, it is for the combination of the stock and the call option.
    For example: BA is now trading at 85.17, the call option BAHR (AUG08, Strike 85) at 2.25 (Bid). If you put in $82.92 as limit, the trade will be executed (85.15-2.25=82.92), but it will be also executed if the stock price is 85.22 and the call price is at 2.30, or the stock price is at 85.12 and the call at 2.20 (85.12-2.20=82.92).

  •  05-18-2008, 2:10 AM 29296 in reply to 29289

    Re: Writing a covered call with a limit on stock price and limit on option price

    Reply Quote
    What type of commission do they charge for this type of covered call (buy+write combo)?   Is it $4.50 for the buy and 4.50 + 0.5 * (the # of contract)?   Thank you in advance for your answer.

  •  05-18-2008, 2:14 AM 29297 in reply to 28935

    Re: Writing a covered call with a limit on stock price and limit on option price

    Reply Quote
    starfin:

    Yeah, but as I mentioned in the other thread, everytime I try to write a covered call on stock I already own, I get a rejection message.



    To sell call on the stock that you are already own, you just simply do "sell to open".  As someone has mentioned above, the "Covered Call" type is a buy and write combo.
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