I have done many covered calls over the years. I can understand the desire to get out of the stock before the weekend of expiration. My broker allows naked call writing. If the stock shows a profit and the call is OTM, I sell the stock on Friday of expiration week and allow the short OTM call to expire. Another option is the exit the stock and call simultaneously (as a combo), as someone previously mentioned. I would enter this trade starting the Friday before expiration. You will find that the call value has pretty much depreciated, and there may be no sellers (or buyers other than you). I have tried to exit the short calls during expiration week, and I do enter the lowest offer possible, and still no takers. Last option, which I have never done, may be to sell an ATM or slightly ITM call option on Friday morning. Of course there is no guarantee that the stock gets called, but the extra premium may be enough to make up for any drop during the day. My choice, if I didn't want the stock, is to sell it on Friday and allow the naked call option to expire.
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Covered Calls and Expiration Issues
- Thread starter DataCruncher
- Start date
Quote from dagnyt:
You are great with the innuendos that you know something useful.
But the truth is you never tell anyone what it is because you have nothing to tell.
Mark
The OP sent me a PM, and I informed him about what I meant on Thursday. This makes your statements lies, or simply words coming out from a frustrated mind who does not conceive of the idea that others can know what you may not know.
Quote from jwcapital:
I have done many covered calls over the years. I can understand the desire to get out of the stock before the weekend of expiration. My broker allows naked call writing. If the stock shows a profit and the call is OTM, I sell the stock on Friday of expiration week and allow the short OTM call to expire. Another option is the exit the stock and call simultaneously (as a combo), as someone previously mentioned. I would enter this trade starting the Friday before expiration. You will find that the call value has pretty much depreciated, and there may be no sellers (or buyers other than you). I have tried to exit the short calls during expiration week, and I do enter the lowest offer possible, and still no takers. Last option, which I have never done, may be to sell an ATM or slightly ITM call option on Friday morning. Of course there is no guarantee that the stock gets called, but the extra premium may be enough to make up for any drop during the day. My choice, if I didn't want the stock, is to sell it on Friday and allow the naked call option to expire.
This is a great post. Note that the poster is concerned with what I understand is the real concern of the OP, that is the call is believed/practically worthless, but one is forced to hold the stock with the risk this entails, and no expected reward.
The OP cannot make covered calls, so he cannot sell the stock.
I told him a way to do things.
Again if I were him, and I had to spend money, I would not buy back the call, but spend the money to buy a put in case something happens to my stock after the bell.
Quote from ajacobson:
If you really feel compelled to buy back an otm call instruct your broker to request a cabinet trade. Cabinets are done for a premium of $1 for the contract. There is no multiplier just a dollar. Traditionally done to establish a firm cost basis.
Thank you for sharing this. I did not know about these orders before. I checked with CBOE, and I am learning new things.