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re: Can you sell calls to establish a short position?
Posted on 7/12/16 at 10:36 am to dabigfella
Posted on 7/12/16 at 10:36 am to dabigfella
I think I contributed to the confusion, so I want to add one last thing. 'Short' and 'long' are overloaded words, whose precise meaning sometimes depends on context, and I misunderstood your original context.
Correct. When I originally replied and said 'Yes, subject to your margin requirements', I misunderstood what you were asking.
Selling the calls is effectively similar to being short, and that is what I thought you were asking about. Options contracts don't extend past their expiration, though. Whatever is going to happen with respect to your option trade will happen before expiration, and nothing will be left after.
So, 'yes', selling naked calls will put you in a position that could be described as 'short'. But 'no', it is not identical to creating a short sale of the underlying issue.
quote:
Thats why I was asking you if I could sell them to establish a short position....I wasn't telling you to put the trade on, I was asking "Can I do this" The answer is clearly a no then
Correct. When I originally replied and said 'Yes, subject to your margin requirements', I misunderstood what you were asking.
Selling the calls is effectively similar to being short, and that is what I thought you were asking about. Options contracts don't extend past their expiration, though. Whatever is going to happen with respect to your option trade will happen before expiration, and nothing will be left after.
So, 'yes', selling naked calls will put you in a position that could be described as 'short'. But 'no', it is not identical to creating a short sale of the underlying issue.
Posted on 7/12/16 at 1:15 pm to tokenBoiler
The trade would be upside down right now $1.78 per share, and the option is up today over 100%, so the sold calls would have lost over 100% of yesterday values, which were already down about 50% yesterday.
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