Opened (IRA): QQQ August 19th 321/370 Short Call Vertical
... for a 1.79 credit.
Comments: I'm fairly certain my June 24th 321 QQQ short put isn't going to finish out of the money with 10 days to go and that I will be assigned shares with a cost basis of 321 minus whatever I've collected in credits so far. For purposes of what will become a covered call, however, I'm using the short put strike as my starting cost basis (321.00) and selling a call against with a cheap long call. Naked calls are generally verboten in an IRA, so buying that cheap long is a sort of temporary workaround until I'm actually assigned stock. (Selling a call against stock you own is permitted, as long as you have at least one lot/100 shares of stock).
Post assignment, the setup will be an August 19th 321 covered call, with a cost basis of 321.00 minus the credit received of 1.79 or 319.21.
Comments: I'm fairly certain my June 24th 321 QQQ short put isn't going to finish out of the money with 10 days to go and that I will be assigned shares with a cost basis of 321 minus whatever I've collected in credits so far. For purposes of what will become a covered call, however, I'm using the short put strike as my starting cost basis (321.00) and selling a call against with a cheap long call. Naked calls are generally verboten in an IRA, so buying that cheap long is a sort of temporary workaround until I'm actually assigned stock. (Selling a call against stock you own is permitted, as long as you have at least one lot/100 shares of stock).
Post assignment, the setup will be an August 19th 321 covered call, with a cost basis of 321.00 minus the credit received of 1.79 or 319.21.
Trade active:
Now that it's virtually guaranteed that I'm going to be assigned on the 321 short put, I rolled the August 19th 321/370 to the September 16 321/398 short call vertical for a 2.11 on strength here (since I'll collect more credit than were I to roll on weakness).
I went ahead and widened the spread even though the resulting BPE is greater since I'll claw that BPE back after assignment. The broker is treating the spread as a standalone trade with its own risk and accompanying BPE at the moment; that will go away post-assignment since it will now be a September 16th 321 covered call with a cost basis of 317.10/share.
If the long call aspect is worth anything post-assignment, I'll go ahead and close that out (it only cost me .10, so I'm not expecting to claw back much out of it, but $10 is $10).
I went ahead and widened the spread even though the resulting BPE is greater since I'll claw that BPE back after assignment. The broker is treating the spread as a standalone trade with its own risk and accompanying BPE at the moment; that will go away post-assignment since it will now be a September 16th 321 covered call with a cost basis of 317.10/share.
If the long call aspect is worth anything post-assignment, I'll go ahead and close that out (it only cost me .10, so I'm not expecting to claw back much out of it, but $10 is $10).
