How To Handle Deep In The Money Covered Call

Selling deep ITM covered calls?

I'm looking at some of the premiums on deep itm calls on fairly non-volatile stocks, and it seems like a no brainer to write covered calls. Am I autistic or is this as sure of a thing as I think it is? Why would someone buy and then exercise an option at such a heavy loss to them?

level 1

If it sounds too good to be true, it isn't. So go for it!

level 2

I agree with the sentiment, but the math seems to check out

level 1

The premium is basically zero or even slightly negative in the last day. ITM calls basically all get called.

You will make a bit of money most of the time, but you're also limiting your upside significantly

level 2

Correct answer, in this case he OP only makes money from selling the ITM call if the stock goes down, he could just buy a put instead and deal with less complications.

level 1

If you want to collect safe premium, ITM covered calls are easy money, but it's not a lot of money.

Calls are bought and sold many times before expiration. The person who bought your call for $1 is not the same as the person who's executing it for $0.02 upon expiration.

level 2

But that makes it worth it right? So long as the stock price itself is still less than premium+strike price then it's essentially free money since I can just rebuy the 100 shares at current price?

level 1

You should research selling cash covered out of the money put options with 35 to 60 days to expiration. I've been practicing this strategy for a few months now in a paper trade account and I'll be selling my first put option this week in my actual account after I sell Ford tomorrow. I like the odds they afford the seller/writer. If you sell a naked put option though your broker can force you to buy the put contract (100 shares x Strike Price) even if it breaches .01 in the money at any time so watch for that.

level 1

The counterparty that purchases your call is not necessarily the same counterparty that you deliver the shares to if they get called away at expiration. My understanding is (and someone can correct me if I am wrong) is that the option clearinghouse or your broker use a lottery system to assign options when they are exercised.

level 1

Figure out on Monday where MM is trying to pin the price and round up to next $0.50 strike. Sell covered calls at this to Robinhood options traders bc they are laughably dumb and eat that shit up. MM will pin the SP right below strik price on Friday, you keep your stock and the tears from those mongoloids.