Comments on Dividend Growth Investor: The pros and cons of selling covered calls on divi...

One reason I could see to buy back the options is ...

2011-12-12T01:30:00.041-08:00

One reason I could see to buy back the options is if the stock has dropped significantly in value, and you dont think its going to rebuild, to can buy to close(perhaps for much less than you sold the options for), and sell calls for the same expiration at a lower strike. its possible to get hurt a little bit, especially if the new strike is lower than you originally paid for the stock. Another reason would be if you think the stick is about to completely fall off a cliff, and you want to get out before that happens. Granted buying a put would be an alternative to this.

"One thing I've done is buy back the call...

2011-12-08T19:25:22.274-08:00

"One thing I've done is buy back the calls and then resell them further out, which basically buys me more time and another premium."

Whoever wrote this clearly has no idea what they are doing. When you sell an option you are receiving money and are taking on an obligation to sell if the owner of the option wishes - in the mean time you hold on to your shares. Whether or not early exercise is ever economically smart for the owner is another story, but you can't call your broker and ask that they exercise the ITM calls you SOLD just so you can free up your capital. Furthermore you bought back the options for a loss (why? to free up your money? Why did you sell the options in the first place then?), then you sold more options with further out expirations to "buy" you more time. Here's a tip, you aren't "buying" yourself anything, you are SELLING time. Selling time that you already sold once, then bought back for a loss, and then are selling again. Maybe you should read some more before you trade options...or maybe I should be happy there are people like you in the market giving their money away. As the saying goes, "A fool and his money..."

another 'option' is to sell a put option i...

2011-09-18T11:11:45.828-07:00

another 'option' is to sell a put option if the underlying stock is rising and close to your strike price. The premiums combined lower your real price paid for the stock. Remember, 80% of options expire worthless.

The thing is you don't know all the different ...

2010-08-30T09:31:26.260-07:00

The thing is you don't know all the different premiums that may have been paid for calls of that precise type. When the options exchange goes to assign open options on expiration day, you could still get assigned the option even if it isn't "in the money" relative to what you were paid for the call.
If you want to be totally safe against being called out you may want to buy it back before the expiration date.

Anonymous is not correct about the exercise of the...

2010-06-21T10:03:03.670-07:00

Anonymous is not correct about the exercise of the call. The holder will exercise if the price rises above his strike price, PLUS the call premium (his breakeven point), not just the strike price.

That's true. I've actually called Schwab to try an...

2009-03-23T07:42:00.000-07:00

That's true. I've actually called Schwab to try and initiate an exercise on some shares that were pretty deep in the money. My intent was to get the shares sold now so I could have the $ to reinvest, rather than having to wait until the exp. date. Schwab said the was no way to do that, so unless you want to buy back the calls (at a loss), you just have to wait it out. One thing I've done is buy back the calls and then resell them further out, which basically buys me more time and another premium.

Anonymous,

It all depends on whether you ar...

2009-01-24T13:27:00.000-08:00

Anonymous,

It all depends on whether you are selling european or american options.

Best Regards,

DGI

Correct me if I'm wrong, but if someone has a stra...

2009-01-24T10:49:00.000-08:00

Correct me if I'm wrong, but if someone has a strategy of owning the underlying stock and wants to sell a covered call thus holding the stock and call through expiration, the stock must be trading at a higher price at expiration Friday, not during the time interim period in which he is holding the call,for one to be called out of the stock. If the stock is trading at a price below the strike at expiration Friday, one still keeps his underlying stock and has received the call premium. The point being that the stock price on Expiration Friday determines whether one is called out of his stock...not what the stock trades at during the time period between purchasing the call and up-to expiration Friday....Any comments about this?

This is a great article. Covered Calls has it's kn...

2009-01-13T19:04:00.000-08:00

This is a great article. Covered Calls has it's known disadvantages which the author points out very well. But a well disciplined covered call trading strategy can be very profitable and will beat stocks in all but the strongest bull markets. Also, any covered call trader will need some sort of tool to help him make decisions on when to manipulate his positions. A great tool can be downloaded at http://www.coveredcallcalculator.net