I know we can write options against opened long stock for covered call. But I'm more interested to know if that long stock position can be replaced to a long call position with just different maturity day? I'm an individual investor so can't really freely write options so I wonder if brokers like IB offer such tool to combine my long call position to allow me open an short position of options.
Vertical debit spread. Buy a call option and sell a higher strike or buy a put and sell a lower strike. IB will let you do it.
A simple rule for me when I started trading back in 2013: As long as my write is "covered" it is allowed by most brokers. For calls, a covered position is one with a lower or equal strike and expiration that is equal or longer.
As already pointed out, this is a common strategy. Just be aware that if your "different maturity date" of the long call is before the expiration of the short call it becomes a naked write when the long expires and your margin adjusts accordingly.
Yes and all brokers do. Some brokers like IB even allows you to write options by themselves called naked option writing. Although it is highly lucrative you shouldn't do that as it is an extremely risky position.
Be a bit cautious where European options are involved - especially in a calendar. Have an extended chat with your broker as some don't recognize the calendar for European indexes and treat the short as naked. Why - you have no option you can exercise against any short exercise. If they verticals than it usually OK.
Thank you guys, I know we can always make Vertical strategies to write options but i'm question is more about the opening time difference. For example, I have opened an long call option at 1/2/2019. After 10 days, i decide to sell it, but rather than sell the option i opened, i want to sell a new call option with just different maturity day(longer). I know it's strange but due to some compliance constraints, i'm not allowed to sell within 30 days since i opened the position. So I wonder if brokers such as IB provides such a functionality to allow me to sell an option but to combine an existed long call position to a Vertical combination so that on my book of position, it's reflected as a single position but not two (as i'm allowed to write naked options). In certain scenarios, when volatility jumps high the call option i have in position is very profited so i want to write a different option to take a profit back pocket and transfer the risk to future. I guess i have to buy back the option once the first one expired to cover the still left-over short option positions. But that's fine. I really want to know whether brokers allow investor do like this, not only to write option to combine an existed long stock position but also to combine an existed long call position.
Assuming that this is all occurring in the same IB account... no, the positions are distinct, but there is nothing from stopping you from selling the deferred contract which results in a short calendar (same strike, different exp) or a short diagonal (different strike and exp). You can effectively neuter your greeks, but it will book as two distinct positions. Greek-wise, you can essentially trade flat (risk).