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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: NateC who wrote (11681)	10/18/1999 1:25:00 AM
From: Hectorite	Read Replies (1) \| Respond to of 14162

< Does the broker automatically exercise my long call (March 50) for me?> I seriously doubt it Nate. My broker would just mark me 2000 short and let me deal with it. Your choices are to call in and exercise your call or simply close out both contracts. You should bank close to the 10 pts (less the pts above 50 the underlying was when you bought). I shouldn't think you will lose too much time value off the March in one month. Now that I think a moment, closing out would be better, perhaps much better than exercising because you can get a chunk of your time premium back if you sell the march call. You would lose all of it if you exercised, no?

To: NateC who wrote (11681)	10/18/1999 1:55:00 AM
From: Ira Player	Respond to of 14162

Does the broker automatically exercise my long call (March 50) for me?.... If he does, fire him, then sue... Your choices depend on how far it is in the money when the November expires. If very deep in the money, the extrinsic value of your March 50's will be small. You may want to close both. If it's the $2 you mention, I'd buy the November back for about $2 and sell the December 65 for about 3, given the current IV. You get another $1 in premium, another $5 in strike and another month to play... But that's me. Ira

To: NateC who wrote (11681)	10/21/1999 2:06:00 PM
From: FruJu	Respond to of 14162

In other words..do I LOSE the long call altogether,....or just sell it at market, to the broker.....when he automatically exercises me? If it comes down to you making money versus the broker making money, the broker will win every time. It is nearly ALWAYS better to make sure a situation like this doesn't occur with calendar spreads by buying back the short calls (even if at a loss) and selling a month or two further out to pocket extra time premium. (As noted in another followup, the only exception is if the price has really rocketed on you, and you would be looking at a huge outlay to buy back the short calls, plus the time value of the long call has diminished to almost nothing).