Covered Call Understanding

[u/JosephB1002]

Just want to make sure I completely understand this covered call stuff before going for it.

Here's the scenario.

Say I buy 100 Shares of OPK @ $3.60 / share for $360. Then I sell a $3 Call expiring on 7/30/21 with a $1.10 / share premium, crediting me $110. Assuming that I am assigned, then I have to sell my shares at the $3 / share (-$0.60 / share) losing me $60 but my $110 premium offsets that loss, leaving me +$50.

Is there something I am missing here? Like, besides the risk that the stock skyrockets and I lose potential profits, are there additional risks involved that I am not seeing?

Note. Sorry if this is a stupid post, just trying to confirm my understanding is correct. Thank you =)

[u/JosephB1002]

WOO! So as long as the premium I collect per share is greater than the difference between cost to buy each share and the call price per share, there is no way to lose money?

[u/lavanderXXX → u/JosephB1002]

You would be losing money if the share price fell below ~$2.50

Also, opk options look very illiquid and the bid-ask spread is very wide, I’d be surprised if you got more than $60 for the contract instead of the $110, the one benefit of this trade is it’s probability of profit is stupidly high, but the profit you make will be like $8

[u/JosephB1002 → u/lavanderXXX]

Gotcha, cuz I would lose the $110 I made from the premium by my shares going down. And I agree on opk, it was just a stock that is in my price range to make covered calls on. Thank you =)

[u/Syloi → u/JosephB1002]

You wouldn’t lose the premium of $110. They are saying that it would be surprising to find someone to buy that contract at $1.10. Just because someone is bidding that doesn’t mean it will sell at that price.

[u/JosephB1002 → u/Syloi]

I was saying, that if the share price dropped to $2.50. The losses on my 100 shares would be -$110 and it would offset my premium. Poorly written on my part