If I plan to sell a call before the expiration date does the break even price matter? Or do I just make a profit based on if it went up a little?
@DrakeCor Depends.... 1) Do you own the stock? 2) If you sell a call ( short it ), then you want the stock price to go down, not up.
Well, there could be a scenario where a 4- to 6-month Call was sold at (for example) strike 40 for $3, and then as expiration approached the stock price went to 41 and the Call premium dropped to $2, in which case buying back the Call yields $1 profit. But generally speaking, to maximize profit on sold Calls, @OldFart is absolutely correct, you would want the underlying stock to stay below strike. With options, break even is always relevant as a matter of developing, benchmarking, and *continually* revising your exit strategy.
@Three Eyes I think I miss read his post. I think he's referring to the price of the option: "Or do I just make a profit based on if it went up a little?" @DrakeCor If the price of the option is higher than the price you bought it for, then you should make a profit ( less commissions ). If the price of the option is higher than the price you shorted it for, then you have a loss.
Ha ha, you're probably right. Just goes to show how important it is to be clear about option prices vs underlying stock prices!
