Holding Deep ITM Calls, What To Do Next?

A

artvandaley

Hello All,

I'm holding $40 Jan '21 BMY calls. BMY is currently trading at $63. With another year to go before exp, I was wondering if it would be in my best interest to either roll them up a bit and/or roll them forward to '22, or just continue to hold them. This is in my roth account.

Thanks!
 
I would suggest posing 3 questions, three times:
What if the stock goes to $80?
What if the stock goes to $65?
What if the stock goes to $50?

I would pose that question "immediately", and 9 months out, and "at expiration."

Those 9 answers will steer through a lot of fog. (And BTW, those questions shold be posed *before* you take on an ITM LEAP.:confused:)
 
Thanks for the replies!

Tommcginnis, At the time of my purchase, BMY was around $45 and was really only creeping up and down. I was just hoping we'd be at $60 by Jan '21, didn't expect to get there a year early. This was one of my first option transactions, so I'm still fairly new to the strategy. Obviously I got lucky with this one. Anyway, unless it drops below $60, at which point I would sell, I would just assume to hold until expiration, as it's looking strong, but again, I don't know if it would behoove me to take some sort of action here or not. Let's say I believe we'll hit $70 before expiration, what would be the preferred route to take?
 
artvandaley said:
Hello All,

I'm holding $40 Jan '21 BMY calls. BMY is currently trading at $63. With another year to go before exp, I was wondering if it would be in my best interest to either roll them up a bit and/or roll them forward to '22, or just continue to hold them. This is in my roth account.

Thanks!
More...

I did a back test of SPX naked call options and in 2013 the position was destroyed. I swore I'd never sell a naked call again nor sell covered calls on stock I wanted to keep. On the put side I decided to close any position for a 1x loss. This may be the best option (no pun intended) for the call side, basically the old wise adage, "take your loss". Count the loss as tuition.

It may work to roll for more time and move your position closer to the market. This was what my strategy was until I saw how badly a naked call position could get hurt
 
artvandaley said:
Hello All,

I'm holding $40 Jan '21 BMY calls. BMY is currently trading at $63. With another year to go before exp, I was wondering if it would be in my best interest to either roll them up a bit and/or roll them forward to '22, or just continue to hold them. This is in my roth account.

Thanks!
More...
artvandaley said:
Thanks for the replies!

Tommcginnis, At the time of my purchase, BMY was around $45 and was really only creeping up and down. I was just hoping we'd be at $60 by Jan '21, didn't expect to get there a year early. This was one of my first option transactions, so I'm still fairly new to the strategy. Obviously I got lucky with this one. Anyway, unless it drops below $60, at which point I would sell, I would just assume to hold until expiration, as it's looking strong, but again, I don't know if it would behoove me to take some sort of action here or not. Let's say I believe we'll hit $70 before expiration, what would be the preferred route to take?
More...
Very interesting.

I had CELG stocks and options since late 2018. I said had because CELG is now BMY + $50 + BMY-RT and CELG options are now BMY1 options.

I exited my options a week prior to the merger with a very nice profit. I am keeping my BMY stocks but converted the $50 cash into BMY-RT.

If your trade was based on hope, perhaps you take some profit and let the rest run. Me? I think BMY still has legs but was satisfied with my option profits so just got the hell out, nothing scientific on that decision and no regrets either.
 
Thank you Dr for stopping by. Yeah, I have never played with naked options, too risky for me. I started with straight calls and now I'm tinkering more with spreads. From your post, I'm not sure if you thought I was short my calls or not, I am long and luckily up over 150% at the moment.

Hey Chef! Yes, I too held CELG shares since '18. Bought around $100 and watched it drop and drop but never sold. Taking advice from a more seasoned trader than I, I bought the BMY calls this summer when BMY was around $45. I now hold BMY shares as well and the BMY-RT too. I didn't think about buying more of the BMY-RT, but I did take some of the cash and bought more BMY shares the same week of the merger. Likewise, I still think BMY has room to run, just trying to determine how to play it.

Thanks!
 
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