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Royal Dutch Shell plc Message Board

  • nomorehomes nomorehomes Jan 23, 2014 6:23 PM Flag

    US Court saves RDS from itself

    That is what the headline today should have read.

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    • Hard to understand but keep trying so you can explain it to the rest of us...

      • 1 Reply to oldpro2old
      • Not sure to whom you asked "keep trying so you can explain it to the rest of us." If you were addressing that to me, I will try...

        When selling calls, I recommend selling only covered calls...otherwise one's potential losses are unlimited - if the share prices were to take off...

        So, say I have 1000 shares of RDS. It is currently selling for 72. If I were to sell 10 Feb. 72.5 calls (each call is for 100 shares) for $0.80 (which I did yesterday), then i would have the following future opportunities (on or before the third Fri. in Feb - last trading day before the calls expire):

        1) If the stock is below 72.5 (at expiration), then the options will expire worthless and I can keep the $800 premium I received when I sold the stock as a trading gain.

        2) If the stock is above 72.5, I can do nothing and my 1000 shares of stock will be sold for 72.5 and I still keep the premium - so, I effectively get $73.3 (72.5 + 0.80) for my shares.

        3) If the stock is above 72.5, I can roll the calls (buy them back and sell the following month's calls - usually for about $0.50 more than I buy them back for).

        Of course, depending upon stock price prior to expiration, I can also buy back the calls any time before expiration. And, someone else cal always buy my stock at 72.5 prior to which case I would effectively get $73.3 for my stock.

        There are other opportunities as well...but they are more complicated...

        Hope that helps to clarify...

50.51-0.08(-0.16%)Oct 25 4:02 PMEDT