Need Some Help (Virtual Account)

Dcalov : You should watch some very basic youtube guides on options trading and how they work. There are many factors that play into the value of your contract. You bought the option for $308 and sold it for $298. The value of your option went down since you bought it, and you sold it at a loss of $10 (if you had multiple calls, multiply 10 by however many you sold).

I can't see when you placed that order, but at a glance, it looks like you paid way too much for an option that was already almost in-the-money.

Your reasoning in the last bit isn't sound. You were going to sell if the stock next week if it didn't hit $35? If you bought the contract when it was near 35, as I'm guessing you did, you'd be selling at a massive loss. Familiarize yourself with the different forms of decay as well, and implied volatility. With options trading, time works against you.

Ken Griffin Charity : You didn’t lose any funds. You sold a call at 2.98. Since the underlying is now deeper in the money, the call is now trading at 3.08. The -3.36% is just the price difference between your sell price and the current trading value.

JoshCarter4 : When you sell a Call, you receive a premium upfront. In this case, it was $2.98. Multiply by 100 since there’s 100 shares in each option contract, and you received $298.

Important context: The purpose, in principle, of buying a Call is because you want to purchase the shares at a cheaper rate but don’t want to take on all of the risk of owning it outright. In your example, the Call buyer believes the price will be much higher than 35 so they pay you a premium to lock in the $35 price. The way this mitigates risk for them is that if the price goes down to $5 a share, instead of buying 100 shares at market value (say, $32) and losing a huge amount of capital, they’d only lose the original $298 premium. As the Call buyer, they have the *option* to choose to buy 100 shares per contract bought at the Strike Price (in this case, it’s a Strike Price of $35).

Now what does this mean for you? As the seller of the Call Option, if the price of DJT goes and stays below the $35 Strike Price by the time the contract expires, you need to do nothing. You’ve already made your profit/easy money.

The problems happen if DJT’s share price goes and stays above the Strike Price, especially on expiration date. If that happens, one of two things typically occurs: the Call seller Buys-to-Close their position or the Call Option is exercised.

If you Buy-to-Close, you would then need to buy a Call Option with the same expiry date and Strike Price to cancel out the original contract. So you’d pay $308 per contract and lose $10 per contract. But you’ll keep your shares.

If you let the Call be exercised, that means you need to sell 100 shares per contract at $35 each - regardless of the actual price. Since you sold a covered call, it means that if it gets exercised, you make a profit either way. It just might mean that you make less profit than you otherwise could have.

That’s a bit of the basics.