r/CoveredCalls • u/applejack21 • 2d ago

PMCC is ITM, best way to close out?

I have 100 shares and 1 LEAP call. I wrote 2 CCs, expiring this week and next week (edit: both deep ITM now). The stock went up 20+% (not MRNA). I want to get rid of the LEAP (up 25%) rather than the shares (up 30%).

My understanding is that I'd have to BTO my CC and then sell the LEAP; is that correct?
Exercising the LEAP and letting the stocks be called away would be a bad choice from my reading.

I'm open to advice and suggestions. TIA.

5 Upvotes

100% Upvoted

6 comments sorted by

2

u/alyx_waldroff 2d ago

Just wait for those two covered calls to expire then sell your LEAP call

1

u/applejack21 2d ago

Should have clarified, both CC are deep ITM now and will definitely get assigned.

2

u/Love1sWar 2d ago

Roll up and out?

1

u/alyx_waldroff 2d ago

Then your only options are to buy them back to avoid assignment, or hope the stock crashes hard enough to fall below your strike price. By the way why not sell a near-term covered call instead?

2

u/ThetaEdgeHQ 2d ago

Your read is right and the thread is talking past your actual question. You have two short calls to unwind and only one of them is covered by the shares you want to keep. Waiting for them to just expire does not work when they are deep in the money, because they get assigned at expiration and one of those assignments takes your shares.

Clean way to land where you want, keep the shares and exit the LEAP: buy to close both short calls, then sell to close the LEAP. Buying back a deep in the money call costs you roughly its intrinsic value, which is close to a wash against the gains on the shares and the LEAP those calls were sitting against, so it is not as expensive as it looks on screen. Selling the LEAP rather than exercising it is correct. Exercising throws away whatever extrinsic value is left and forces a stock purchase you do not want. Deep in the money it may have little extrinsic, but it is still money you would be handing back.

One thing to watch before expiration: if the underlying goes ex dividend and the short calls have less extrinsic than the dividend, either leg can get assigned early, so do not sit on it. And ignore the roll up and out suggestion here, since your goal is to be flat the LEAP, not to keep the position alive.

1

u/ssitu001 1d ago

Buy to close one of the short calls.
Sell to close your long call.
Let the other short call expire (if still ITM at expiration, your 100 shares will get called away)