Howdy Fellow Investors and the like,

For the sake of accurate paper trading i am interested in learning how to write an option, (both call and put).

From what i understand i know roughly how to work out the premiums, for example: $20 thousand worth of $4 per share would get 10 cents premium average (approx), but i dont know how to work it out precisely. Thats one thing i was hoping someone could help me with, how to precisely work out what premium you will get on your written option (call/put). Can we actually make up our premium based on criteria? Whats the process followed in determining these figures?

The other key component in writing an option contract is the strike price, i understand that depending on the strike price and the length of the option contract it will affect your premium. So how do we work out a strike price that will give us maximum premium, minimum premium etc..? And do we get complete control on what strike price is written into the contract? Can we say strike price of 20.50 for a sale price of say 20.49 and for say 3 mths etc...Or do we have complete freedom to write options for say 1mth with a strike price of 30 on a sale price of 10.

Knowing this information will allow me to be precise in my paper trading and this is very important i believe if im to be confident at writing options. Some people will say that a broker writes your options, and thats great but if anyone knows how to do it and is happy to share, would be much appreciatted.

Just one more thing, if the strike price is set below the sell price on a call option, or a strike price is set above the sale price of a put option. What happens with the premiums when you write out calls and puts in this manner? Do they change at all?

For example a strike price of 10.50 was reached from a sale price of 10. And i wrote the put option, do i get the increase in share value also in addition to the premium?

And if i write a call option at 9.5 from a sale price of 10 do i receive the .5 movement in addition to the premium?

Please refrain from using links in your replies and if you are able to reply directly to the questions & comments that will help. Elaborate a little if you must, but please keep it relevant.

Thank you,

Rod

## Bookmarks