Hi, I mentioned the other day I was new to options. Something which confused me today was I have sold a call option on Nvidia for $190 it expires on the 17th September. It was up around £50 but then today it dropped to -£15 but the stock price was only $177 is this because of volatility? If the price is still below $190 at expiry would I still collect the full premium? Just confused as the price didn’t get near $190
Posted by Sea_Appearance2612
4 Comments
You collected the full premium the moment you sold it.
You said you sold a put. A whole separate thing is whether you will be forced to buy those shares at the put price. If you sold the put at a $190 strike and the price is below $190, you are buying 100 shares at $190 each for each contract you promised to but at that price. If the stock is at $180, you are paying $19,000 for each lot of 100 shares, instead of the $18,000 open market price.
But if it closes above $190, the contract just expires worthless and you just keep the premium.
NVDA went up today so a short call lost value. Is a October 17 call? You said it’s a September 17 call and that’s not a Friday
The Oracle news and subsequent gap up in NVDA gave people hope that NVDA can keep rising, so both intrinsic and extrinsic value increased.
If NVDA stays below $190 you keep the premium you already received.
If NVDA goes to $190 or higher by next Friday, and you do not buy back the call option, you will be assigned and purchase shares at $190.
Think of it probability. Because the price went, higher odds that 190 will reached, so value of call goes up. Because you’re short, it shows up as -ve PnL. At expiration, if price below strike, you keep full premiums, else you’re on hook for providing 100 shares.