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Blue chip share renting, otherwise known as writing a call is an options strategy that allows an investor to put his shares up for sale at a future date. The investor adds a premium value to the price of the shares.

Confused? It really isn’t all that difficult. Say you have 10 shares of a blue chip stock that’s selling today for $10 each. You might write an option call with a $5 premium dated six months from now. If a buyer takes your call (and don’t you wish they all would!), you will sell him your blue chip stocks on that date for $15 per share. The catch is you must sell the stock on that date for $15 a share, even if the shares have increased to $20.


So renting blue ship shares can be a bit tricky. The previously mentioned scenario is a bit extreme, but it is possible that a blue chip share could increase more than the premium value you put on it when writing your call. It isn’t likely to happen to a wild degree, but it can happen—and you will have to sell your blue chip shares for the agreed price regardless once you’ve written a call and a buyer has taken it.

The good news is that you would only consider renting blue chip shares that you’d be happy selling right now. So if you’d be pleased with a price of $10 a share now, then $15 six months of now would be great—even if the blue chip shares were worth, say, $16.

If renting blue chip shares interests you, then you will want to talk to your broker. Most of the time, renting shares can only be done in quantities of 100 shares. When considering blue chip share renting, you will also want to take your broker’s fee into consideration and be sure that his or her fee is covered by your premium. The last thing you want, even less than you want the shares to be worth more than the premium you’re asking, is to lose money on renting shares because you have to pay a high broker’s fee!

Related posts:

1. What Are Blue Chip Shares
2. How To Rent Your Shares or Write a Covered Call
3. Call Options
4. What is an Option
5. Put Options
6. The first thing you should know about the options
7. Options: Due Date
8. Buy shares below market price. Selling put options
9. Options, What are they and how
10. Purchase of call options