OK so I got the amount he would be in the hole wrong. But you can't use the defense of "Wait till next week". On Friday he would in a worse position.
(If that ain't right I am interested in knowing why.)
No, stock going down is "good" in that situation which is why someone pointed out it was bearish to do.
situation 1. Put in a sell order for 100 @$500 -> when the stock price hits that level you will have 100 fewer shares and $50,000 more cash
situation 2. Sell a covered call for $500 on Friday for $X/share -> you get $X * 100 right now
2A. If the stock stays below $500 through Friday you keep $X * 100
and you keep your 100 shares.
2B. If the stock goes to $1500 on Friday you keep $X * 100 and deliver your shares for $50,000.
I've never done options trading, but there are fees involved, so subtract the fees from the gains above. The risk in the covered call is missing out on future gains.
The point, as I saw it, was that if the original poster
really wanted to sell at $500 then the covered call would accomplish that, plus the profit from selling the call. Other than accounting for fees, I see the point. If you
really want to sell at $500 in lots of 100 shares and the call brings in more than the fees I'm not seeing any downside. Of course, I think it is easy to understand that someone might be pretty unhappy selling covered calls at $500 if the stock price rockets quite a bit above that.