If I tried to sell the exact same item to two different people on EBay and collect a deposit from both people, I would be in for some serious trouble. I would probably be tried and convicted for fraudulent behavior, not to mention get a bad seller review.  But look at what I can do to EBay stock itself using call options. 

 

 

On September 17, 2009, I purchased some shares in EBay at $23.78 per share. The next day, I sold the October 25 calls on those shares for $0.76 per share. That means I agreed to sell those shares that I owned to the purchaser of the calls for an agreed upon price of $25 per share. In other words, I had already “sold” those shares and had committed them to someone. This is known as selling a covered call. It is a way to make income on a monthly basis or to lower the cost of your stock investment.

 

 

But on the third Friday of October, EBay closed the day under $25, and the shares were never actually “called” away. I got to keep the premium that was paid for the calls and the shares themselves. The following Monday I sold the November 25 calls for $1.15 per share since EBay stock started trading above $25 per share. That means that as I write this, I have EBay shares of stock which cost me $23.78 minus $0.76 minus $1.15 for a total net basis of $21.87.