ShmoopTube

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finance a la shmoop what does called away mean? ....Okay Boeing the bomb maker was [Boeing plane dropping bombs]

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trading at 127 bucks a share you thought it was getting pricey now at

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25 times earnings well at $135 a share you'd sell it but here at 127 it was right on

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the ledge in no-man's land unclear in your brain whether or not to [Girl thinking about stocks]

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sell so you sold a covered call on it that is you sold another investor the

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right to buy your Boeing shares any time in the next three months for $135 a

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share that's what they pay you and that investor paid you two bucks a share for

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that privilege so in essence you have a "forward sold" share of BA

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at 137 not 135 right did you collect the two bucks there and you're feeling

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pretty proud of yourself for coming up with this clever way to gently either [Girl feeling smug]

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get out of the stock or make a free two bucks a share if the stock well never

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went up that much but oh how the cold cruel street works...

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A month later Santa tells the press that North Korea is being naughty and it

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needs not socks or rocks but bombs dropped on it and a huge order for big [Bomb explodes]

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fat noisemakers comes in to Boeing while the stock rockets overnight so to speak

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From 129 to 152 a share, wow!

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so what happens now well the other investor who paid two bucks a share for

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the call option from you to buy your share at 135 well, they're dancing in

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the street they're feeling pretty smart she paid two bucks for what is now a

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gain of 152 minus 135 or $17 a share and yeah you read that right she just

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made eight and a half times her money in a month good work if you can get it and

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what happens to you well your shares of Boeing were called away yes took us a

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while to get there to the definition thing they were called away by her thank

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you very much then we're so far out of the money the other investor just called [Investor shouts and stock goes towards investor]

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them right away paying you your two bucks and you just getting the hundred

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and thirty-five bucks a share in cash there and that's it goodbye you lost all

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the upside because your shares were called

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away and meanwhile you watch the shares waft slowly upward over the next year [Boeing share value rising]

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from 152 a share to 200 and you weep at the gains lost we also used the term

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call away to refer to calling a bond early right like if you bought some

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bonds from Boeing that gave them the right to call them before the bonds [Bond appears]

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reached maturity and they do this all the time people well there's nothing you

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can do those bonds will have been called away by Boeing so to be fair they do pay

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you a little premium there usually for the privileged calling away yeah so not

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necessarily the best thing for you but don't lose your cool and get mad because

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when you sure don't want to end up on Santa's naughty list this year [Santa's reindeer fires laser at city]

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we've heard Boeing's work wonders on Rudolph..

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