arazzabo asked:


My brokerage account is at a level of covered writing. the only choices I have when I select trade on an option chain is “sell to open” and “buy to close”. I understand what they both mean but have a few questions:
Symbol is “F” (Ford), current price is $7.85.
if I sell to close a 1 contract option with a strike price of $8.00 with a bid of .10 and an ask of .15 with an expiration date of Sept. 22nd and the strike price is not reached, how much money do I make? I know I would receive a net of $2.00 in my account (.10 X 100 = $10 minus $8.00 commission). Do I just keep the $2.00 if the contract expires? If the actuall price of Ford goes down to say $7.35 in a couple days, would I “buy to close?” I guess what’s confusing to me is the ask/bid prices on the option.

Also, can you sell to open puts and also calls? What’s the diff? I know a call is bullish and put is bearish. I might just be confusing the whole thing. Thanks for any info. I’m really trying to understand.
Awesome advice/answers….Thank you. On the Friday that my option is going to expire (assuming it’s below the strike price), do I have to execute a “buy to close” trade or just let it expire?
So let’s say I held 700 shares of Ford at $7.50 and “sold to close” a 1 contract option with a strike price of $8.00. Ford goes to $8.05 tomorrow. Do I now hold long 600 shares and am paid $800 dollars for the sale?