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Tag Archives: Options Clearing Corporation

Expiration Dates versus Expiration Times: Important Clarifications

When we sell covered call options or cash-secured puts, the expiration date of our monthly option contracts is usually the third Friday of the month at 4 PM ET. However, this is not to be confused with the expiration time of these contracts. The latter is the date and time when the contract is rendered […]

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American Depository Receipts and Special 1-Time Cash Dividends/ Discount Coupons for New Book & Calculators

When viewing option chains while crafting our covered call writing portfolios, from time-to-time we will see unusual strike prices. These anomalies are usually associated with various corporate events that result in option contract adjustments. Such events include stock splits, mergers and acquisitions and the one highlighted in this article, special 1-time cash dividends. In July […]

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covered cal;l writing and dividends

Why Would a Call Buyer Exercise, Rather than Sell, an In-The-Money Call Option?

When we write a covered call, there is a trader or market-maker buying that call on the other side of the trade. We know that as expiration approaches, the time value of options tends to approach zero (Theta effect). With that in mind I received an email from Marcos in early May 2017 astutely asking […]

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covered call writing calculations

Why Option Buyers Pay More for In-The-Money Strikes

When we sell an in-the-money covered call, we are taking a defensive posture and using the intrinsic value component of the premium to protect the time value initial profit. As an example, let’s look at New Oriental Education (NYSE: EDU) on April 7, 2017: EDU priced at $61.50 $60.00 (ITM) call priced at $3.55 Expiration […]

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Expiration Friday Exit Strategy Decisions For In-The-Money Strikes

Covered call writing and selling cash-secured puts obligates us to buy or sell shares at the strike price by the expiration date. Exercise will generally occur if the strike is in-the-money by 4 PM ET on expiration Friday (usually the 3rd Friday of the month). Frequently we do not want to sell our shares or […]

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option liquidity showing Volume and Open Interest

Open Interest: How it’s Calculated and Why it’s Important

When selling call and put options, the liquidity of these securities must be evaluated to determine their eligibility. There are two measures of investor interest in options, Vol(ume) and Open Interest (OI). Vol represents the number of times a particular contract is bought or sold in a particular day. Open interest, on the other hand, […]

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Options Clearing Corporation: Guaranteeing Our Options Trades

Covered call writing and selling cash-secured puts involves investing our hard-earned money. Did you ever wonder who guarantees these trades? It’s not our broker or even our broker’s clearing firm. It’s the Options Clearing Corporation or the OCC. This is an organization that acts as both the issuer and guarantor for option and futures contracts. […]

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