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Ask Alan # 197 Should I Buy Back My Call Option to Capture Share Appreciation?

Ask Alan # 197 Should I Buy Back My Call Option to Capture Share Appreciation?

Alan answers a question posed by Patrick, who asks:

Alan,
I bought 100 shares of BHP on 1/11/2022 for $63.08 and sold the 2/18/2022 $65.00 call for $1.46. The stock price is up to $67.99 on 1/19/2022 and the cost-to-close the $65.00 call is $4.40. Given the amount of time left, is it worth buying back the option to capture the price appreciation and restructure the trade at a higher OTM strike? Any thoughts are most welcome.
Sincerely,
Patrick

Covered call writing involves generating cash-flow while capping the upside. When share price accelerates significantly after entering a covered call writing trade, there are several exit strategies we may consider. In this Ask Alan video, rolling-up, the mid-contract unwind and taking no action approaches are evaluated.

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