Poet,
Oh the joys of writing those ITM CCs
One thing you could do is nothing. Looks like your cost basis is down to 50.00 -0.55 - 5.60 = 43.85. If you get called out you make 6.15 on 43.85 or 14%. That's not all bad. The spread you are looking at would be to buy back the NOV50 and sell the NOV55, at a cost of 3.60 to potentially make an extra 1.40, but if you do that you raise your cost basis to 47.45. That looks pretty safe.. today, but unless you are very confident the market is going to continue up from here the added potential reward is not all that great compared to the higher risk.
The move to a January expiration is not very attractive now, but it may get better if things flatten out a bit. The near term call prices are inflated here because of the run up, so you won't do all that well on the exchange.
One never knows for sure, but today just might have been one of those spectacular counter trend bear market rallies where a lot of shorts got taken out and some panic buying kicked in with people being afraid of missing the boat. If so, you would likely be better off using the opportunity to lock in your profit buying a cheap put, like maybe the NOV50 for around 1.50, or if we go higher even the NOV55. Then if MSFT goes back to test 50 again you can take a profit on the put and still be in great shape on the NOV50 CC, or if the market starts looking really weak you can ride it out to expiration with no fear of losing anything on the trade. There is a fair chance you could make more on the put that you would from the extra premium on the call roll up, and your downside situation is far superior. Worst case you give back some of the premium you collected on the NOV50 when you get called out.
If we had a crystal ball, this would be really easy. <ggg>
Dan |
