How to choose Covered call: Exit strategy

Discussion in 'Options' started by NHS, Dec 2, 2009.

  1. NHS


    I have 100 call contracts (100 stocks) at strike 290 with expiration June 2010. I paid 10$ for each contract. At the time the stock price was 320 – so I was in the money. After some time I sold 100 call options at strike 330 with expiration Marts 2010 – I got 3$ for each contract. I used my June options as security to cover assignment. The deal is that I always should have security in stock or other call options with lower or strike.

    Now the stock price has gone up to around 350 and I would like to somehow cash-in or at least get some cash into my account. My June calls are valued at 13$ and if I should buy back the marts calls, I sold, the price would be 6$.

    I thinking about leaving the calls I sold, as they are now pretty expansive to buy back, and maybe rolling up or up and/or forward my base calls. I would buy a higher time-value by rolling up and forward but I would get some cash in.

    I think the stock price have almost reached the limit and will stay or fall 5%, so it looks like I'll have to handle assigment in marts - anyway.

    Later I would like to sell calls again with security in the same June calls.

    Any ideas to handle this?
  2. NHS


    In short my questing: is there any way/strategy around gaining if the stock goes up after you have written calls with other call’s as security – given that the calls for security as lower strikes and expiration after the written.

    The only ones I can see (and they are not that good):

    1. Roll up near written calls strike
    2. Roll up near written strike and forward to longer expiration

    The result should be more cash in the account but also higher strikes and I have to buy more time value.
  3. heech


    Does not compute. You can not buy calls that are $30 ITM for $10.
  4. NHS


    You are correct. Im from and trading in Denmark and I did not convert the strike and current stock price into $ - only the price paid. The currency ratio is aprox. 1:5