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Ask Alan – Delta and Covered Call Writing

Alan answers a question coming from Andrew of Marblehead, MA. Andrew writes… "I was watching JP Morgan when it was trading at $33.75, and the August $34.00 call was at $0.93. After taking a phone call, the stock price was up $0.65 to $34.40, but the call option increased only $.35 to $1.28. Does this have anything to do with the option going from out-of-the-money to in-the-money? Please explain.”"

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

One Response to “Ask Alan – Delta and Covered Call Writing”

  1. Andrey April 30, 2022 12:12 pm

    Hi Alan,
    I am a fan of your tutorials. Thank you for your good work!
    I have a question:
    Recently I bought a debit Call spread of TSLA, Expiration 32 days for a net debit of $575.
    When TSLA started to tank a few days ago, I rolled over (bought back and sold the next (nearest) Expiration my short Call for a debit of $250 and a realized gain of $630.
    Then the same day I rolled over my position back to my old Expiration and received a net credit of $230 plus realized gain of $700 TSLA.
    So now my net investment is: 575+250=$825,
    and I have a realized gain of $630+700+230=$1560.
    But now the cost basis of both these legs (Long and Short Calls) is showing an unrealized loss.

    My question to you is: If my trade (both these legs of my debit Call spread) ends worthless on Expiration day what happens to this unrealized (paper) loss?
    And what is my actual P&L that I should reflect in my ledger if my trade ends as I wrote above (worthless but in paper loss)? The money earned-money invested?

    Thanks profusely!