Quote from newguy05:
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
What atticus prposed was selling an additional call for a ratio write. This is equivalent to a short strangle.