Boca_Bobby Basics

[shady05]

Sounds good Im going to check it out. I just realized something considering that time decay is a big factor with option premium. Someone who wanted to be really conservative can just short or in option terms sell a call like really far out of the money and lock in that premium when it decays. I think im on to something.

For Example xyz is trading at 20.00. Now I want to sell the 30.00 strike calls trading at .50. I sell 10 so that's $500 and there is 25 days left before expiration. Now the day before expiration xyz Decays to .10 and I have 10 calls short. Can I cover those 10 calls for $100 buck giving me a $400 gain. and keeping the $500 premium. for a gain of $900.00. Basically similar to cover a short on stocks.

I hope I somewhat make sense. I kindof have an ideal in my head but it harder to explain. lol