Writing covered call getting executed early?

Question

It is June now and I want to do a covered call for Sept at a strike price 35.00 and the stock is 30.00 now is it possible my stock could get called away in July if the stock goes past 35.00?

Answer 1

I think you should go for the red one.

Answer 2

Is it an American option or a European call option? An American option can be called or put at any time, so if you have sold somebody a call you could get called out of the stock in July on a September contract. A European option can only be exercised on the end date. Find out if the call you are selling is American or European.

It doesn't matter if the company is American or the options exchange is in America. there are 2 different types of options, Amercian and European.

Here's how I remember it: America is the land of the free; American options are free to be exercised at any time.

Hope this helps -

Answer 3

Yes, the option can get exercised any time prior to the expiration date

Answer 4

You bet. I did that last month. I had an option and took the stock. You will have to furnish the stock when the buyer advises he wants it. He doesn't have to wait until option expiration. Those are American style options. European options are redeemable at expiration.

Answer 5

Assuming you are talking about an exchange traded option in the United States, it has an American-style settlement which means that it can be exercised an any time prior to expiration. So, it is possible you will be assigned early and see your stock called away in July.

Even though it is possible, you should understand that it is quite unlikely. The only financially valid reason for exercising a stock call option early is to capture a dividend if the dividend is substantial and the option is in the money. You are most at risk of being assigned just before the stock goes ex-dividend.

If you are assigned early at any other time it is essentially a gift since (1) it increases your annualized return and (2) you can almost certainly immediately repurchase the stock and rewrite the call for less than you received when you were assigned.

Answer 6

Yes, you would have to sell it if the option is exercised.  That means you will have to sell it at $35.  This risk last from the day you sold the option to the day it expires.  So, in august you will not have to worry about getting called unless you sell another call.

Answer 7

Yes you can have it called away if the market price rises to the strike price or higher.  This can be called at anytime, assuming your talking about American options

Not sure what you mean by "executed early", but once someone decides to call the stock, all options with the same strike price go through a selection process, the selection does not care when the contract was written, it systemically picks one, and that's the one that gets assigned.

Answer 8

Yes, although in pro lingo -- it is not being executed "early."  The point of American style options is that you CAN execute them at anytime prior to expiration.