Help: best way to handle my ITM calls

[bballshinobi]

I have some ITM calls and I plan to liquidate some and use those gains to exercise the remaining calls. I would like to ask for your help because it's really my first year trading options and I am sure there are better ideas out there than what I am currently planning.

I have 10 of each. My original plan when I bought the 2021 March $200 and $300 contracts was to use the profits on the $300's to exercise the $200's, which can work right now. However, in the event of a super S&P squeeze in the upcoming few weeks, maybe the stock price will go crazy temporarily and I want to prepare for all possible scenarios. I estimate that if the stock price goes to the $825-$850 range, then I can sell either:

• Sell $2021 $300's to fund 2021 $200's + 2022 $360's, or
• Sell $2022 $360's to fund 2021 $200's + 2021 $300's

At the moment, I am leaning towards selling 2021 $300's to fund the 2021 $200 and then hold to the cash until I have to exercise the 2022 $360's. I think this gives me more flexibility for the next year, whereas if I sell the 2022 $360's then I am basically locked in and have no maneuverability.

What do you guys think? Which way would you do? Or perhaps you have other ideas? I am all ears. Thank you!

 

[Johann Koeber]

Please remember that by exercising these calls a long time before the expiration date, you are throwing away the time value. The time value can be substantial if the IV is high; this can be expected when a fast run-up occurs. On the other hand, the time value decreases when the strike price of the option is a much lower percentage of the stock price.

So be sure to check the time value of the options. Usually it is better to sell the options instead of exercising. That way you get paid the time value.

Depending on your tax situation, exercising the options might be beneficial to your tax bill.

Obviously no advice, just food for thought.