What is the best order type to buy back my covered call?
Asked 4 years ago
OK I apologize that this is a pretty basic question. I have sold a covered call hoping that it would expire worthlessly. The underlying is now increasing and the call is now approaching the price I sold it for. I'd like to buy it back for a little less than I sold it for and roll it forward. What is the best order type to do that with--just single order of buying it back? I sold a boeing call with 235 strike price for 1.65. Now if I put in a limit order for 1.40, while the call is going for 1.30 everyone would want to take my extra $10. Is it a stop loss I should do?
Andia Rispah Igobwa
Monday, June 07, 2021
Most brokers offer a roll option that buys and sells automatically based on the set credit/debit amount.
Options you can consider are;
- Simple roll - pick the new expiration and strike, then set the limit on the credit you’d like to receive or the market price to make it go through fast. But you can lose money on the spreads.
- Buyback the call ASAP while it’s still worth less than you paid for it. Then set a trailing stop limit order only to sell the new one once the price drops again.
- Let it go and see what happens. Here, you won’t lose unless the call you sold had a strike lower than your cost less premiums received.
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