Buying Back Covered Calls ✪

Closing a position early, known as "buying to close" (BTC), is the secret weapon for managing risk and maximizing capital efficiency. Here is why this "un-trade" is an essential part of your toolkit. 1. The 50% Rule: Harvesting Your Gains

: You free up your shares to sell another call immediately, effectively compounding your returns. 2. Dodging the "Tax Trap" buying back covered calls

: Buy it back. By closing the trade early, you eliminate the "gamma risk"—the danger that a sudden stock surge will wipe out your gains in the remaining 25 days. Closing a position early, known as "buying to

The Art of the "Un-Trade": Why Buying Back Your Covered Call Is Often Your Smartest Move The 50% Rule: Harvesting Your Gains : You

If your stock skyrockets and your call goes deep "In-the-Money" (ITM), you face assignment—meaning your shares are sold. If you’ve held those shares for 11 months, being assigned would trigger a , which can be significantly higher than long-term rates.

Most investors enter the world of covered calls with a "set it and forget it" mindset. You sell the call, collect the premium, and wait for either a modest gain or a steady income stream. But the real professionals know that the most critical part of the strategy isn't the sale—it's the .

Options Trading: Covered Call Strategy Basics - Charles Schwab