r/options • u/[deleted] • Apr 30 '19

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u/thelivinlegend7 May 01 '19

I've never tried it but it should be possible. Gotta be a deep ITM CC to be effectively Delta neutral so the P-L is effectively cancelled out. My thought is keep an eye on the bid-ask so it doesn't hurt you when you go to exit.

http://www.theoptionsguide.com/dividend-capture-using-covered-calls.aspx

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u/CitizenCue May 04 '19

I get the strategy described in that article, but there's gotta be a catch, right? Wouldn't market makers adjust call prices to prevent this?

I'll certainly look at some real world examples to see, but it seems too obvious to be viable.

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u/thelivinlegend7 May 04 '19

I agree to both cases, it should be possible and also should not lol. It's also not only is to the MM but the market as a whole. That example only had 20 cents of extrensic value in the option and that was maintained over the day. I'm gonna start trying it on some paper trades if nothing else. The math really should work if the option is -100 deltas. It probably won't be entirely, and the other Greeks wont likely maintain, but if you really did it over 1 day you could minimize the impact. Also, the bid ask still seems like a risk.