Options Trading: Covered Call Strategy Basics - Charles Schwab
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 buying back covered calls
: You free up your shares to sell another call immediately, effectively compounding your returns. 2. Dodging the "Tax Trap" Options Trading: Covered Call Strategy Basics - Charles
The Art of the "Un-Trade": Why Buying Back Your Covered Call Is Often Your Smartest Move known as "buying to close" (BTC)
: 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.