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Options Question


woltac
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Let me preface my question by saying I have no experience with options.

 

I am thinking about placing a limit order to sell LUK at just over $30/share.  Would it be better to sell a $30 call expiring in June at about $2/share (the last sale was at $2.11 or about 7% of $30)? 

 

Am I missing something or is the option sale a no brainer since I plan to sell the stock anyway? 

 

Thanks,

 

Woltac

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You are correct however the previous poster has it right.  When you sell a covered call you are essentially selling a naked put without holding the stock.  Your downside is unlimited while your upside is capped.  The only reason to do this is:

 

You are certain the stock will not go down but you are equally certain it will not go up ;)

 

In any other case, it would be better to just hold the stock or sell the stock and have no position. 

 

 

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