In the money covered call - RIMM

Discussion in 'Options' started by polpolik, Dec 21, 2007.

  1. Got a question to you guys and i think i know what the answer is already but might as well ask:

    bought RIMM at 104.4 yesterday and shorted the 115 Jan call options at 4.24. Right now, as you can see, RIMM is at 124.55 so my short calls are around $14 as we speak.

    what's the best way to take profit here assuming i have no clue where RIMM will go from here. Just let the call option expire so I don't pay the "time premium"?
  2. You're synthetically-short the 115P, which went OTB at $13.80. The put is $3.80 mid in the pre-market, so I'd recommend you cover with your $10 in winnings. The question is, do you want to be short the Jan put at $3.80 with the shares at $123.60? You can sell the 130C to effect a synthetic 115/130 outside strangle. Selling any call results in a synthetic combo.
  3. You're potentially jeopardizing the stock position by being wrongly concerned about the option's time value. Consider selling the stock on the open, hope for a price pullback in the stock and volatility decay in the option, then cover the option at a lower level.
  4. Thanks risk, nazz - I'll cover then when I can. I was thinking that too - risking too much cause i dont want to pay a few bucks for time premium.
  5. at 124 , JAN call will have a delta of .7 at the open. Sell 30 shares now to "lock" the profit / become DN
  6. Not a bad idea to sell a weak-straddle at 115, neutral to 124. Assume 4.50 for the 130C nets 18.30 on a 115/130 strangle. I'd rather hold the 18.30 [initial] credit or cover.
  7. Wow, the pre-market on the 115P just went to 5.60 mid on the put. I would recommend selling the 130C at the open; leaving you net-short the 115/130 strangle.
  8. I'm in over my head with this one :) I bought back the call and sold the stock. then I'll probably need to read up on options more in the future.
  9. Talking to atticus about options is akin to discussiong relativity with Einstein..
  10. Well the man is brilliant, atticus is like mozart in options, usually i was able to grasp what he is saying after rereading it a couple times and type it out on notepad, but this one just cant understand no matter how hard i try.


    The OP sold covered call at 115 strike at $4.24 with a cost basis of $104.4. Now the call is at $14 and stock at $124.55. So if he:
    1) cover the short, sell the stock NOW, will have a profit of ~$10 per share.

    2) wait until expiration, will save ~$4 on time premium, but risk the underlying drops lower while waiting. If underlying stock drops to $110 at expiration, he will make the same $10 as 1).

    3) sell the stock, keep the option. Then wouldnt he have naked short call position then? I dont understand how this is a good idea considering RIMM is pretty hot right now
    #10     Dec 27, 2007