Deep-ITM covered calls

Discussion in 'Options' started by ADLE, Mar 11, 2006.

  1. ADLE

    ADLE

    Thank you, Arni,
    I always forget about dividends... :mad:
     
    #31     Mar 15, 2006
  2. While you are at it, you need to look up how that .80 dividend will/should be taxed. I'll give you a hint, it's not at the 15% dividend rate.

    Good Luck. :)
     
    #32     Mar 15, 2006
  3. A very important difference, indeed.
    Calls very deep in the money often have little to no premium.
    There's that risk/reward thing again.
    The first in the money call has the fattest premium.

    Arnie

    [​IMG]
     
    #33     Mar 15, 2006
  4. Well, even if it's 38%,
    62% of something is better than
    100% of nothing.

    Arnie

    [​IMG]
     
    #34     Mar 15, 2006
  5. jj90

    jj90

    Using Deep ITM covered calls has no purpose as has been brought up unless using they have much premium in them (aka high IV or LEAPs). And as been brought up again, there are better ways to to do it. If one was to use CCs then ATM or OTM options would be best to do this as those options are mostly premium.

    BTW, Arnie I'd watch out for MO's dividend.
     
    #35     Mar 16, 2006
  6. You have my attention, what do you mean?
     
    #36     Mar 16, 2006
  7. jj90

    jj90

    I don't know when the next time MO's dividend is, but when it comes around watch out for your short call as it's got a good chance to be early exercised. Especially if the cost of carry + same strike put price < dividend.
     
    #37     Mar 17, 2006
  8. If you read my post, it went ex-div this Monday, the 13th.
    It didn't get called away, I still own it.
     
    #38     Mar 17, 2006
  9. zdreg

    zdreg



    if it is in the money it will get called away.
    what are you referring to when you talk about hoping. that is not a strategy.
     
    #39     Mar 20, 2006
  10. rcmcfe

    rcmcfe

    Just so I'm clear on this, here's my position.

    Bought 100 shares of ICO yesterday @ 22.95. Sold 1 contract of the Aug. 22.5 calls for a premium of 3.10....

    Well, today ICO is trading @ 27.69 and the price of the 22.5 call is 6.00..

    So...the way I figure it, I have 3 options...

    1) do nothing @ expiration, & at which time my 100 shares will be exercised @ 22.5. This leave me with a 45 loss (22.95-22.50). But I will get to keep the 310 premium I received when I sold the calls...

    or

    2) buy back the 22.5 calls and take a loss of 290 (6.00-3.10*100). ( this is assuming I bought back the calls today). But I get to keep the stock.

    or

    3) buy back the calls @ expiration in which case I keep the stock but could suffer a loss on the call buy-back.

    Is this correct? This is my first covered call trade.

    Thanks.
     
    #40     Aug 2, 2007