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Eli5: How do stock calls work?

Main Post: Eli5: How do stock calls work?

Top Comment: A call option, is an options to buy a stock at a preset price. Let’s say Acme Corporation is currently trading at $9 a share. I sell a call option expiring in 1 month, for 100 shares at $10 a share. The buyer of the option pays me $.10 a share for the contract. So I get 10 dollars for selling the contract. In one month the stock is trading at $10.50 a share, so the buyer of the option exercises their right and buys 100 share at $10 a share. This option is said to be in the money. Now if I had already owned 100 shares that I had bought at $8 a share, this would have been a covered call and I would have profited $200 in the trade. If I did not have shares, this would have been called a naked call, and I would have to buy 100 shares at $10.50, and sell them at $10. I would have lost $50. Now lets saw in one month the stock is trading at $9.75 a share. This option would be called out of the money, and would have expired worthless. No buyer is going to pay $10 a share when they can buy it for $9.75 on the open market. However I as the sell of the option profited $10 from the optional premium I collected.

Forum: r/explainlikeimfive

Is anyone trading Poor Man's Covered Call on Interactive Brokers?

Main Post:

Hi all,

Been trying to find answers on this all over the net but haven't had much luck... Just wanted to clarify a few questions relating to Poor Man's Covered Call..

Question 1 - Scenario

  • Long 1 x AAPL LEAPS with Strike at $110 @ $20.25;
  • Short 1 x AAPL Covered Call with Strike at $129, expiry date in 7~40 days.

Say I only have a balance of $2,500 and at expiration on Friday, the share price rises to $130 to which I get assigned the 100 AAPL stocks at $129.

  1. If I do not have $129 x 100 = $12,900 in my account, what happens?
  2. I understand Interactive Brokers will not be automatically exercising my LEAPS, do I have a chance to exercise my LEAPS?
  3. How long do I have, to exercise my LEAPS so I can be in the clear?
  4. Are there any other risks whilst doing this?

Question 2 -

I am thinking of selling weekly covered calls for AAPL, however there seems to be a gap between (Apr 30 '21) to (May 21 '21) of 21 days. Is there a reason for this gap, or does it get updated weekly?

Sorry for the noob questions and thanks in advance for reading the above!

Top Comment: The EleiteTrader forums or the options subreddit will be better place to ask with more informed people.

Forum: r/interactivebrokers

Swing trading

Main Post:

Hi! Trading had been a terrible journey for me, I want to step back from day trades seeking daily profits and focus in swing trades that I can keep for a few days until it reaches my target. Could anyone here give me an example of how they plan their swing trades from the beginning to the end?

Top Comment:

Hi, I hope this helps.

For screening potential stocks I:

  • Take a look at options flow. I try to check for significant (500k+) directional bets on options. Premium to market cap ratio is a decent benchmark.
  • Hedge fund flow (check if there are instutitions buying/selling, which ones are buying/selling).
  • Plot dark pool levels on chart for support/resistance (sort of used like volume nodes). These are significant price levels where institutions are participating.
  • Volume price analysis (determine institutional accumulation).
  • Technical analysis (8/21 EMAs, kreg, to determine trend) and also to identify chart patterns such as cup and handle, bull flags, pennants, etc.
  • Additional trend identifcation using Minervini template:
Minervini Trend Template 1. Stock price is above MA 150 and 200 2. MA 150 is above MA 200 3. MA 200 is trending at least 1 month(22 days) 4. MA 50 is above both MA 150 and MA 200 5. Current stock price is 25% above 52 weeks low 6. Current Price is within 25% of 52 week high 7. RS Ratings
  • Look at industry trend
  • Look at macro trend (SPY, QQQ)
  • Look at seasonality stock performance
  • Look at seasonality industry performance
  • SeekingAlpha
  • Check short interest
  • Look on X (Twitter) for addiitonal DD, charts, and overall sentiment
  • Look at news (Google, X/Twitter, Finviz, Yahoo)
  • Google for investor letters (i.e ACME Asset Inestor Letter spotllghts $STOCK)
  • Low-mid cap companies brekaing out of their base (AFRM, SOFI, UPST, TOST, etc.) can have insane momentum due to hedge funds piling in after sentiment has shifted.

For entry:

  • I try to enter on support for longs
  • If trading a breakout, I try to do an entry on a pullback to a key level of support - whether it be dark pools, EMAs/kreg line, or a previous high (especially if the pullback is on lower volume). Or even previous resistance turned into support.
  • Stop loss would be 0.25 ATR below those key levels to make sure I don't get stopped out prematurely.

Forum: r/swingtrading