Saving a Broken Covered Call by Rolling Up and Out
2023-05-13 I just recently discovered the magic of rolling losing options positions to handle unexpected market movements. Prior, when I sold a covered call, I felt at the mercy of the underlying’s price to decide whether I’d get assigned on a losing position. Rolling positions allows me to seemingly have my cake and eat it too. This is particularly useful when trading securities that can trade multiple times a week. Specifically, imagine you have a SPY covered call with a strike price of $410, expiring on May 15, 2023. SPY is currently trading at $411.59. There’s a good chance you will have your shares assigned at the end of May 15… If this is your intention, that’s great. You keep your premium, you get some cash for your shares, and you lose out on a little bit of capital gains from SPY’s upward movement (assuming you sold the covered call below $410). But there exist other options where you can keep your shares and make money keeping them: Ro...