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Strategies & Market Trends : The Options Box
QQQ 629.07+0.5%Oct 31 4:00 PM EDT
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To: Poet who wrote (10795)5/11/2001 11:52:10 AM
From: smchan  Read Replies (1) of 10876
 
I prefer front month calls

Not sure what front month means but I suppose it means the next month (ie Jun calls in this case)?

If I'm repairing a position because the underlying is over the strike price and we're in the last week of the cycle, I'll "roll out" to the next month.

As a rule of thumb, is it preferable to repair or be called? Or does it just depend on whether you desire to keep the stock or not? The only good reason I can think of to not be called are the issues of short/long term gains and the wash rule. Some of my IBM stock is still considered short term, so I'm guessing once I sell calls, I'll want to be careful to try to keep rolling them out so as to avoid being called and paying a higher tax?

I never thought of rolling out to repair a position. Looking at EMC, for example, if I were short the Jun 40 (EMCFH) at say $2 and the current price is $3.80, I could cover and roll out to the Jul 40 (EMCGH) for $5.20. I've lost a $1.80 on that particular trade (shorting and covering the Jun 40) but I get a chance to try it again with the Jul 40. Even the Jun 35 (quoting around $6.80) could be repaired by selling the Jul 40 and a small amount of cash. Do I understand the gist of repairing a position by rolling out?

Thanks, as usual, for the help. :-)

Sam
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