I have no idea how to roll stocks on IBKR desktop portal, or my broker...only on tos. So I am entering that as a $3400 debit? The problem is even if no extrinsic value, I could still lose intrinsic value if things continue down.
To convert 100 shares to the call spread enter ONE order to buy the 10C, sell the 19C and sell 100 shares of stock. You should receive a credit of ~$1,000 (mid=-10.01). (***For every 100 shares you convert.) ***IB image below but most platforms will be similar. Some will use "Buy to Open" the 10C, "Sell to Open" the 19C and "Sell to Close" the 100 shares. IF the stock gets to 16, then you can roll the 10/19 Call Spread to the 13/22 Call Spread. This should be ONE order so "Sell to Close" the 10C, "Buy to Close" the 19C, "Buy to Open" the 13C, "Sell to Open" the 22C. This ONE trade should be a credit. ***IB image below but the prices will be different as the stock price will be above 16. ***Yes, you'll lose intrinsic value if the stock falls BUT you'll lose if you own the stock also. This is just a replacement for the stock which frees up cash AND the max loss on the initial Call Spread is $340 compared to owning the stock @1,335 which can go to zero. When the stock reaches 16 you'll have less profit than if you held onto the stock UNTIL you hold the spread to expiration. That is the one drawdown of using options but you have $340 invested compared to $1,335 invested so you have to be willing to give in somewhere. No free lunches. ***Just try it with part of your position to see how it works. ***You only have to roll out of the 10/19 spread if you don’t want your profit capped at 19.
Ohhh! Converting not just buying a vertical spread. Ok I will look at this. Thanks for the explanation. I'm actually on the IBKR desktop, not the portal. I have used the strategy builder...actually I think they have a roll option if you right click on the position in the portfolio page.
Slow down. Wait. So he SELLS 100 shares he owns... sells them. Then he BUYS the 10/19 cs. He SAVES almost $1K. Incredible.
You're not rolling anything. Why would you put the 3-way on the same order ticket? Sell the stock and buy the stupid cs.
I should be able to do a call ratio spread for a credit if not a small debit better known as stock repair strategy. I'll try some different combinations.
He said he was short on cash so I suggested he sell the stock and buy the call spread which puts ~$1,000 cash per spread into his account. I never said he "SAVES" $1K. I suggested he "roll" the SPREAD if the stock gets to 16. I wasn't telling him to roll the stock. ***I always put the stock and call spread on ONE order. Not sure why you think that's a bad idea. This way you don't have to worry if the stock takes a sudden move after you've sold the stock and working the call spread order.