I am relatively new to the options trading game and have been reading as much as I can on the subject. My basic strategy is the Buy/Write and was wondering about defensive strategies.
Rolling Up/Over - happy with this technique, simply buying back the original contract and then selling a new one (either for the current month or the next) From my experience it is better to buy back the contract before midday of the expiry date (in case the underlying comes back down). Does anyone have any other suggestion?? (Obvious depends upon the trend at the time)
Bull Call Spread - now the book that I am reading states "remove the obligation of the XXX written call we could simply purchase a YYY call" So I have sold a call at X the share price has gone above this so I purchase a call at a lower exercise price (ie so I can exercise). Is this how this strategy works ie I will get exercised on my call so I buy a call and exercise that. I don't get why I would do this rather than rolling up. This strategy will be more expensive although I will be adding an unrealised gain. Or am I missing something that the ASX/ACH just do something with the contracts (ie cancel them) or do I have to go through the whole process of selling the share and exercising and buying shares???
Call Ratio Backspread - The underlying has gone above the strike price, so I buy 2 calls closer to the underlying but still in the money. Why 2 contracts? And once again I am going to exercise these contracts or does something else happen?? If I exercise I end up with twice as many shares than before, why does that help me??
For all the numbers that I ran (based on having to exercise and buy and sell shares (brokeage)) the cheapest option seemed the roll up.
This is all based upon wanting to keep the shares.