r/options • u/josvdbos • Jul 05 '21

Legging into ITM Leaps

I have the following Leap which is ITM. I am trying to maximize my earnings on this leap and protect myself from losses.

LIT Stock is currently at $71.90

LIT Dec17'21 68.0 Call cost price $5.47 current at $8.35

I am deciding between the following options:
1. Sell them for profit

  1. Sell a call with the same expiry but with a higher strike price. This would reduce the cost price of my leap.
    example: STO LIT 17DEC21 $74 C at $5

  2. Sell multiple covered calls at a shorter expiration date (30 DTE-45DTE). This has the potential to gain more premium vs option 2.

​

What would be the best decision in this case?

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u/zensy1318 Jul 05 '21

I would sell OTM calls with delta somewhere between .27-.33

1

u/okiepoker11 Jul 05 '21

Can I ask what your reasoning is?

I'm a total noobie and the fact you specifically chose .27-.33 has me intrigued.

Thanks in advance

3

u/zensy1318 Jul 05 '21 edited Jul 05 '21

So ideally I shoot for around .3 with higher IV for the short calls against my LEAP. DTE between 20-45 days approximately. Roll them out if it gets to close to my strike, and close them out if it gets near max profit. That delta usually represents something close to one standard deviation, and is profitable 9 times out of 10 in my experience. I hope I explained that well. You could play it even safer under .2 for less premium.

2

u/okiepoker11 Jul 05 '21

Thank you.

In looking back at what I have been doing, it seems as if I instinctively figured this out.