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@@TimeLapseCarGuyBruno all rolling is you're closing out the current position and opening a new one. It's basically a shortcut Robinhood created where it combines closing and opening a new position. So if you're in the green in a covered call and the option is worth like 0.02 to close, you might as well roll it, cuz the cost to close is $2 plus you'll get paid a new premium from selling a new covered call. you can also do this in the red too, but normally not for a covered call. some do, but i never do cuz you're just losing out on easy money. i don't mind getting assigned but if you do close it and don't want to get assigned... you probably shouldn't be in a covered call then and open a call credit spread instead.
You need to explain better on letting a covered call expire worthless in the money. A lot of newer traders don't understand that if you let the option expire worthless even if it's losing and in the red (stock price is above the short call's strike price), there is no cost to close - it literally disappears from your account, you keep the premium and the only catch is that you're assigned at that short call's strike price (meaning the shares get sold). There is never a good reason to close a covered call that is losing. If you do, you might as have just opened a call credit spread. You have no business being in a covered call if you're just gonna close it in the red. A covered call is designed to ensure you get that premium regardless of the market conditions. When you close out a losing covered call, you're essentially throwing money down the toilet.
You also don’t say what may be obvious to you but a head scratcher to me. When the shares get sold you lose 100 shares and you get the strike price in your buying power. Why do none of you guys that make these videos or comment EVER say that. It’s so frustrating
@@dupaacct5956 I mean in a way. When you're assigned, you simply have to sell the shares at the strike price, you don't lose money, you're just capped. What a lot of people don't understand is that the delta is what defines this. As a covered calls loses, the delta goes up basically negating more of the income you get (the rate of this delta increasing is set by the premium). You'll never make more than the what the premium set + the difference between the market price and your strike price. Say SPY is trading at $600 and your strike is at $605, and the price goes to $610. You will make up to $500 + the premium. After 4:15 PM, you'll get assigned, sell the shares at $605x100 and that is credited to your buying power plus the premium (which was added the moment you sold the option). What happens next is you can then repurchase the shares, but they will be $500 more expensive since it went way up. Thats the only downside, thats why its a good rule of thumb to put some premium on reserve to keep up the maintenance of covered calls.
selling optoin without collateral is not allowed in Robinhood. That's too risky because theoretically you would have unlimited loss. This is called naked option. Example: if you sell call at 400 without collateral. if spy were to go to 800, you would lose 40,000 with just 1 option of spy sold.
So if it expires in the money say strike price of 30 you set it at you get the 3000.00 for your shares at strike price even if the stock is say 35 current at close minus the premium?
dude.. dude.. dude... you didn't explain what happens if the strike price is met and "exercised."... why does RH chart say "unlimited" loss when you scroll all the way over on the profit/loss chart.... like is RH just dumb and has no clue? how would you lose "unlimited"?.. that to me means infinity.... when in fact all you're actually losing is 100 shares.. correct? this is where im a little hesitant to sell a covered call... need to be sure... PLEASE clarify!!
Basically what it means by unlimited loss is the same thing as if your owned shares went to 0$. If your call doesn’t go above the strike price, you keep the stock. So you keep the stock at what it’s worth, along with the premium. Make sense?
When the strike is met, technically speaking you cap the gain. So in theory, if I owned 100 shares of TSLA at $150, sold a $200 covered call for next year and it went to $1000, you would miss out on $800 of upside (technically unlimited). I think that is why its confusing as it is technically not a loss but Robinhood classifies it as such
Hi Tommy. I just saw that I wasn't subscribed. Hmmm. I'm sorry about that as I enjoy your content and this whole TH-cam interaction thing! Cheers brother ❤
Hello, sorry if this is a dumb question...I'm new to covered calls. Everything I read states the max loss of a covered call being the amount of the 100 shares (1 contract) less the profit from the premium. However, the max loss on the RH simulation says unlimited. Can you explain this to me? Thanks so much.
So using the example you used for the covered call. I apologize for my ignorance or my lack of understanding what may be common sense. So let’s say it goes to 31 and your strike price was 30 and your shares get sold. That means that 30 (strike price) times 100 you will then have $3000 in your buying power and less 100 shares of the stock correct?
No, your contract would actually be worth more the further away it is. Your theta would be less, but the value of the contract is higher. Your theta then increases as exp approaches. If you have .15 theta, that essentially means you're making $15 a day (per contract). Obviously many factors can change this such as volatility and price fluctuations. But this value regardless will go up as expiration approaches.
@tc trading. I have a sell/call. I have 100 shares. Do i have to wait till the expiration date or can i sell at anytime? Whenever i try it claims i do not have enough shares.
I use Robinhood. Let's say I have 100 shares of Intel, how do execute a covered call? I want to make sure it is not a naked call where I can lose infinite amount, right?
Go to options and find a call that someone won't likely buy in the time frame you're going for. The liner out the more you'll make but higher risk. Choose a price that they won't pick generally. There you go. You'll instantly make Cash
Really depends. If the stock is dropping under your cost but the call you want to sell for the expiration date you want is now below as well it doesn't really matter if you are willing to hold longer term but just don't think it will get above that level by this expiration date. If you sold one right after you bought, ideally you sell a covered call higher than your average unless you think the stock will fall lower and you want more downside protection
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I kinda got lost at 7:35 where you explain rolling
me too... some ppl don't have the capability to explain shit like this to novice minds... "talk to me like im a 5 year old please"... sheesh..
@@TimeLapseCarGuyBruno all rolling is you're closing out the current position and opening a new one. It's basically a shortcut Robinhood created where it combines closing and opening a new position. So if you're in the green in a covered call and the option is worth like 0.02 to close, you might as well roll it, cuz the cost to close is $2 plus you'll get paid a new premium from selling a new covered call. you can also do this in the red too, but normally not for a covered call. some do, but i never do cuz you're just losing out on easy money. i don't mind getting assigned but if you do close it and don't want to get assigned... you probably shouldn't be in a covered call then and open a call credit spread instead.
If your losing you can buy a new contract basically
It's like a stop loss.
You need to explain better on letting a covered call expire worthless in the money. A lot of newer traders don't understand that if you let the option expire worthless even if it's losing and in the red (stock price is above the short call's strike price), there is no cost to close - it literally disappears from your account, you keep the premium and the only catch is that you're assigned at that short call's strike price (meaning the shares get sold). There is never a good reason to close a covered call that is losing. If you do, you might as have just opened a call credit spread. You have no business being in a covered call if you're just gonna close it in the red. A covered call is designed to ensure you get that premium regardless of the market conditions. When you close out a losing covered call, you're essentially throwing money down the toilet.
I’ve watched like 20 vids, trying to get this info !!!!!
Thank you!
You also don’t say what may be obvious to you but a head scratcher to me. When the shares get sold you lose 100 shares and you get the strike price in your buying power. Why do none of you guys that make these videos or comment EVER say that. It’s so frustrating
You sound like maybe you should make videos. Just saying.
@@dupaacct5956 I mean in a way. When you're assigned, you simply have to sell the shares at the strike price, you don't lose money, you're just capped. What a lot of people don't understand is that the delta is what defines this. As a covered calls loses, the delta goes up basically negating more of the income you get (the rate of this delta increasing is set by the premium). You'll never make more than the what the premium set + the difference between the market price and your strike price. Say SPY is trading at $600 and your strike is at $605, and the price goes to $610. You will make up to $500 + the premium. After 4:15 PM, you'll get assigned, sell the shares at $605x100 and that is credited to your buying power plus the premium (which was added the moment you sold the option). What happens next is you can then repurchase the shares, but they will be $500 more expensive since it went way up. Thats the only downside, thats why its a good rule of thumb to put some premium on reserve to keep up the maintenance of covered calls.
Do you times the bid X 100 to figure out your premium/ credit?
Thanks for this video dude
No problem!
Update. I see I'm subscribed to Tom Carvo but not this channel. Your getting to be huge like cable TV became back in the day! Thank you man.
Hahaha
Is there anyway in RH to close the covered call all in one order? Buy the call and sell the stock all in one order.
Still..if I’m a level 2 trader..can’t do spreads etc.. they I mean I can’t sell options without collateral so how am I ever going to sell SPY options?
selling optoin without collateral is not allowed in Robinhood. That's too risky because theoretically you would have unlimited loss. This is called naked option. Example: if you sell call at 400 without collateral. if spy were to go to 800, you would lose 40,000 with just 1 option of spy sold.
So if it expires in the money say strike price of 30 you set it at you get the 3000.00 for your shares at strike price even if the stock is say 35 current at close minus the premium?
dude.. dude.. dude... you didn't explain what happens if the strike price is met and "exercised."... why does RH chart say "unlimited" loss when you scroll all the way over on the profit/loss chart.... like is RH just dumb and has no clue? how would you lose "unlimited"?.. that to me means infinity.... when in fact all you're actually losing is 100 shares.. correct? this is where im a little hesitant to sell a covered call... need to be sure... PLEASE clarify!!
Basically what it means by unlimited loss is the same thing as if your owned shares went to 0$. If your call doesn’t go above the strike price, you keep the stock. So you keep the stock at what it’s worth, along with the premium. Make sense?
@@brandonkessler602 kinda.. but I still think it's dumb that Rh says "unlimited loss"... It makes me not want to take the risk.. idiots
I have these same questions
@@crootun that's cuz you're smart like me.
When the strike is met, technically speaking you cap the gain. So in theory, if I owned 100 shares of TSLA at $150, sold a $200 covered call for next year and it went to $1000, you would miss out on $800 of upside (technically unlimited). I think that is why its confusing as it is technically not a loss but Robinhood classifies it as such
Hi Tommy. I just saw that I wasn't subscribed. Hmmm. I'm sorry about that as I enjoy your content and this whole TH-cam interaction thing! Cheers brother ❤
Setting a LEAP expiration on covered calls at a low profit strike anygood?
are you still doing the covered calls trading on Robinhood? I am thinking to get into it.
Yes all the time! Highly recommend for cash flow
Gonna start this week! No more buying the call! Only gonna sell them now!
Great information 😊 thank you
Hello, sorry if this is a dumb question...I'm new to covered calls. Everything I read states the max loss of a covered call being the amount of the 100 shares (1 contract) less the profit from the premium. However, the max loss on the RH simulation says unlimited. Can you explain this to me? Thanks so much.
why its unlimited loss?
What happens if it goes under my strike price at expiration? I sell at that price?
Nothing happens, the option expires worthless. You keep your shares and the money from the covered call.
So using the example you used for the covered call. I apologize for my ignorance or my lack of understanding what may be common sense. So let’s say it goes to 31 and your strike price was 30 and your shares get sold. That means that 30 (strike price) times 100 you will then have $3000 in your buying power and less 100 shares of the stock correct?
Beginner here, but what is the purpose of making an option a couple weeks out? Wouldn’t the theta make it worth less?
No, your contract would actually be worth more the further away it is. Your theta would be less, but the value of the contract is higher. Your theta then increases as exp approaches. If you have .15 theta, that essentially means you're making $15 a day (per contract). Obviously many factors can change this such as volatility and price fluctuations. But this value regardless will go up as expiration approaches.
@@adaptableeffort thank you bro that helped!
@tc trading.
I have a sell/call. I have 100 shares. Do i have to wait till the expiration date or can i sell at anytime?
Whenever i try it claims i do not have enough shares.
Does anyone know if you can sell a covered call against a long call on Robinhood?
I use Robinhood. Let's say I have 100 shares of Intel, how do execute a covered call? I want to make sure it is not a naked call where I can lose infinite amount, right?
Go to options and find a call that someone won't likely buy in the time frame you're going for. The liner out the more you'll make but higher risk. Choose a price that they won't pick generally. There you go. You'll instantly make Cash
You were selling your call at a strike price less than your average cost. Is that normal?
Really depends. If the stock is dropping under your cost but the call you want to sell for the expiration date you want is now below as well it doesn't really matter if you are willing to hold longer term but just don't think it will get above that level by this expiration date. If you sold one right after you bought, ideally you sell a covered call higher than your average unless you think the stock will fall lower and you want more downside protection
@@TCTrading thanks for the insight
Hi Tommy. It's Peter. My mom and I from Italy opened a covered call/sold a call and made 54usd love you bro.. Pete❤
Awesome Peter!
Question. Sometimes I look at a sell call option and it says “+ x number of dollars %”. Can you explain this? Thanks.
Dude, get to the point. It was like listening to a woman take 10 minutes to answer a yes or no question
This video could be a lot better
Thx for abandoning the questions asked here. I guess youve moved on to other things. Maybe delete your channel since this is the case.
Long as video make it short