Total noob question(s) here. I've been long on TSLA since July 2012, when I first drove a P85 at Get Amped in Chicago. I've never sold a share, and am a believer in the TSLA bull cases in the thousands. Several times during this ride, I have considered getting into options to amplify this growth. But I have never traded options before, as I always considered them too risky and complicated, from my limited understanding. As I start to research them more deeply, I think I would only consider long calls, as they seem to be the simplest and least risky. If I believe the bull case, and want to profit off that growth if it happens sooner rather than later, then I should buy OTM calls. Then if the stock price blows through the strike price, I should be able to sell my calls for a tidy profit. Assume I don't want to exercise the call, as I don't want to front more money to buy the shares, even if I could sell them for more than the strike price I purchased them at. Simple reason here is that I might for example buy 10 JUN 21 1880 call contracts, and I don't have 1.88M sitting around to buy 1000 shares at 1880...nor do I want to give up the long shares I own!
Now here are the noob questions on options trading:
1) Say the stock price rockets to 2200 long before the Expiration Date. When I sell the 10 JUN 21 1880 call contracts, do I become a call seller, and as such become obligated to sell shares if the buyer of those calls executes before the expiration date? Or is the original call purchase simply closed out at that point, with me taking the profit and no further obligation or risk whatsoever? I believe it is the latter, I just want to be 100% certain.
2) I assume I would want to set up a limit order or a stop limit order to sell the call once the underlying stock reaches a certain level above the strike price...or more technically accurate, when the bid price of my call option reaches a certain level that corresponds with that. I am playing around with paper money trades in a simulator to do just that. I buy the calls at say $35, and then enter a closing order with a limit of $235. [Is that how I should be doing it?] Prior to sending this closing trade, the confirmation page is saying "Max Loss = Infinite". Why on earth is that? Am I somehow "selling a naked call"? Is it because I am placing a sell limit order when the call I bought is still far OTM? That makes me exceedingly nervous. While I am fine with risking the loss of the entire premium I paid, I absolutely don't want to incur any risk of losses beyond that...much less infinite losses. What am I missing here?
Thanks for any assistance here, it is much appreciated.