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Strategies & Market Trends : Calls and Puts for Income -- Ignore unavailable to you. Want to Upgrade?

To: tyc:> who wrote (4683)	11/1/2010 11:32:23 AM
From: upanddown	Respond to of 5891

"you can't lose money on being exercised early on deep-in-the-money calls." Well, maximum profit is at the strike or above. The profit consists of dividends previously collected and the time premium you captured when you sold the calls. If early exercise occurs, the stock is above the strike so the play is closed with a profit of prior dividends plus the time premiums. I should have mentioned that I only sell LEAPS, usually around 12-18 months forward. I have frequently collected some dividends before being exercised just before the next dividend. If the amount of time premium captured exceeds the annual dividend, then it is better to be exercised early since it generates a higher annualized return than holding to exercise at expiration.