Closing covered call options

The only way to avoid assignment for sure is to buy back the strike call before it is assigned, and cancel your obligation.

However, if the market makes a big move upward in the next 60 days, you might be tempted to roll up and out again. Every time you roll up and out, you may be taking a loss on the front-month call. Furthermore, you still have not secured any gains on the back-month call or on the stock appreciation, because the market still has time to move against you.

And that means you could wind up compounding your losses. Options involve risk and are not suitable for all investors. For more information, please review the Characteristics and Risks of Standardized Options brochure before you begin trading options. Options investors may lose the entire amount of their investment in a relatively short period of time.

Managing Covered Calls

Multiple leg options strategies involve additional risks , and may result in complex tax treatments. Please consult a tax professional prior to implementing these strategies. Implied volatility represents the consensus of the marketplace as to the future level of stock price volatility or the probability of reaching a specific price point.

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The Greeks represent the consensus of the marketplace as to how the option will react to changes in certain variables associated with the pricing of an option contract. There is no guarantee that the forecasts of implied volatility or the Greeks will be correct. System response and access times may vary due to market conditions, system performance, and other factors.

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