Well, this is a first....
We usually get the post from the guy who's trade has blown up and they
want to know how to save themselves from the pain of loss. Here's a
trade that worked!
What you need to do is sit down and crunch the numbers so that you can
make a decision as to whether it makes sense to roll those calls up and
out a month. You have a profitable trade, so the real trick here is not
to do something to make a mess of it. Barring that, you're in a good
position on a good stock.
A few thoughts...
Time value is greatest at-the-money. AAPL is trading at $270, which is
where you sold your call. If you buy it back you are buying all of that
time value back. I tend to leave things alone on covered calls when the
stock is trading at-the-money. If the stock moves higher then a couple
weeks before expiration I start looking at what rolling does for me.
If you're assigned on the call you'll realize a maximum profit. If you
like owning AAPL, you might pick a price level where you like owning it
and consider selling a cash secured put or a put vertical with the idea
of accepting assignment should AAPL pull back.
Lastly, consider whether collaring the stock makes sense at some point.
AAPL has been on a tear and eventually will consolidate. A collar can
provide a nice way of protecting some of those unrealized profits.
Good luck!
Christopher Smith
TheOptionClub.
--- In OptionClub@yahoogro
wrote:
>
> Hey guys,
>
> Very new to options so here is the problem.
>
> I bought AAPL July $260 call couple of weeks ago and sold $270 May
against it. Now price is approaching $270.
>
> What would you do right now as AAPL is $269 premarket right now. Would
you wait two more weeks before you buy back or roll over strike? Or you
would buy back right now?
>
> Did you get assigned three+ weeks before expiration? Because
eventhough price is at strike, option is still made of extrinsic value
and has yet to get any intrinsic value.
>
> Thanks in advance,
>
> Vimal
>
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