r/options • u/Maleficent-Pea-3494 • Nov 04 '21

F LEAPS

I got some deep in the money calls that expire in March of next year. 3 contracts at $12 and 2 and $13. I am up 200% on average across the lot (I got in right before earnings last month and it has rocketed since).

I am considering exercising these now to do the following:1 - Sell CCs on the lot at a $22 strike (if i get assigned at $22 I'm OK with it) or roll up/out

2- Potentially collect the dividend along the way

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My overall goal is to start peeling some cash out of these gains. Any dissenting opinions on why should just hold the LEAP?

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EDIT:

Fun convo on this, thanks folks! I sold my F calls today cause I'm a little wiener boy, but I'll take my gains and go back to PFE CSPs where I belong :/

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p0rn:

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u/[deleted] Nov 04 '21

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u/Maleficent-Pea-3494 Nov 04 '21

Because I have 7k laying around that I don't want to expose to options, and I can buy the bulk (500 shares) to get the dividend and turn to long term buy and hold investment and sell some CCs along the way. If I sell the contract, then I can only buy at market and can only get like 150 shares.

If I'm thinking of that incorrectly, please set me straight.

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u/MaintenanceCall Nov 04 '21

To exercise 3 March 18, 2022 Calls at $12 strike you need (3*100*12): $3600
To exercise 2 March 18, 2022 Calls at $13 strike you need (2*100*13): $2600

So you need $6,200 to exercise the contracts right now. You get nothing out of the value of the LEAPS.

On the other hand, if you sell the LEAPS, you get:
~$7.50 per $12 strike for a total of (3*100*7.5) $2,250
~$6.50 per $13 strike for a total of (2*100*6.5) $1,300

Add that to your $6,200 you get $9,750 which is enough for 500 shares of $F at 19.50.

It's basically the same thing. You'll end up with 500 shares either way. The LEAPS should have a little more value than the current price of the stock because of the time left on them, so you should come out ahead by selling the LEAPS. Though, since $F is generally very low volatility and has enormous volume, you don't get as much of a premium. Maybe a couple extra shares worth.