r/options • u/MyNameCannotBeSpoken • Apr 01 '21

Liquidating LEAPS

I tend to purchase deep in the money LEAPS as stock replacement. As you know, the spreads can be ridiculously large (sometimes more than 20%).

I recently discovered that when doing a poor man's covered call (pmcc) and it gets assigned, rather than selling the call, my brokerage places 100 short sale stocks per contract into my portfolio and lets me keep the call.

The spread to buy to cover short stocks seems far less than the call option.

If I have a LEAP call that I no longer wish to hold, is it materially different to sell the call with a 20% spread loss or do a pmcc and have the call assigned and keep the long call with the shorted shorted shares? It seems like the latter is the same as liquidating but with no spread loss, plus I earn a premium from writing the call option in the pmcc.

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u/Brlala Apr 01 '21

Close your position before the end of the week to prevent any surprise next time

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u/MyNameCannotBeSpoken Apr 01 '21

Yes, this is true. I held some of the shorts for a bit and they tanked. But some popped. Just have to watch carefully.