NaughtyPines

BUYING TO CLOSE VXX MAY 20TH 20 SHORT CALL

AMEX:VXX   IPATH S&P 500 VIX SHORT-TERM FUTURES ETN
I didn't like how far out in time I rolled my short call, so I closed it out, opting to sell something closer in time. So I closed out the VXX             May 20th short call and sold the May 6th 21 short call instead for a credit of .92 ($92).

I'll attempt to be a touch more patient with the roll this time and wait until a few days prior to expiration or until there is little or no extrinsic value left in it.

I originally received a 1.59 credit for the April 15th 21 short call and .77 for the roll to the May 20th 20 short, for a total of 2.36 in credits ($236). I closed out the May 20th 20 short call today for a 1.49 debit, so I realized a profit of 2.36 - 1.49 = .89 ($89)/contract in profit.

That being said, what I'm looking to do here is to roll the short call over time, collect credit for doing so, and get to a point where the sum of the credits collected + the current value of the long-dated call exceeds what I paid to put on the setup in the first place. Naturally, price's caving here helps out the value of the short call (it decreases, which is what you want), but it also decreases the value of the long call. As with an ordinary covered call where you take a position by buying shares of stock and sell calls against to reduce cost basis in those shares, you generally want price to either remain stable or pop.

I'm naturally looking for volatility to pop between now and the expiration of the September long to bail on the set up as a unit ... .
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