Buying back a covered Call
Your three options are: Options 2 and 3 are obviously identical (other than transaction costs), so if you want to keep the stock, go for option 1, otherwise, go for option 3 since you have the same effect as option 2 with no transaction costs.  The loss will likely also offset some of the other short term gains you mentioned. "if you buy back the now ITM calls, then you will have a short term loss. That pair of transactions is independent, from a tax perspective, of your long position (which was being used as ""collateral"" in the very case that occurred). I can see your tax situation and can see the logic of taking a short term loss to balance a short term gain.  Referring to D Stanley's answer, #2 and #3 are not the same because you are paying intrinsic value in the options and the skew in #2, whereas #3 has no intrinsic value. Of course, because you can't know the future, the stock price could move higher or lower between #2 and #3. #1 presumes the stock continues to climb."
This depends on a combination of factors: What are you charged (call it margin interest) to hold the position? How does this reduce your buying power and what are the opportunity costs? What are the transaction costs alternative ways to close the position? What are your risks (exposure while legging out) for alternative ways to close? Finally, where is the asset closing relative to the strike? Generally, If asset price is below the put strike then the call expires worthless and you need to exercise the put. If asset is above the call strike then put expires worthless and you'll likely get assigned.  Given this framework:  If margin interest is eating up your profit faster than you're earning theta (a convenient way to represent the time value) then you have some urgency and you need to exit that position before expiry. I would not exit the stock until the call is covered. Keep minimal risk at all times. If you are limited by the position's impact on your buying power and probable value of available opportunities is greater than the time decay you're earning then once again, you have some urgency about closing instead of unwinding at expiry. Same as above. Cover that call, before you ditch your hedge in the long stock. Playing the tradeoff game of expiration/exercise cost against open market transactions is tough. You need sub-penny commissions on stock (and I would say a lot of leverage) and most importantly you need options charges much lower than IB to make that kind of trading work. IB is the cheapest in the retail brokerage game, but those commissions aren't even close to what the traders are getting who are more than likely on the other side of your options trades. underwriters aren't subject to lock-up.  They actually don't hold anything.  They oversell at IPO, with their short position covered by the green shoe (an option from the company).  If the deal does well, the underwriters exercise the green shoe to cover their short.  If the deal runs into some pressure, they step in to support the price by buying back shares... thereby covering their short.  So they are doing price support in the early days of a deal, but it is almost always paid for by the company granting them an option.  But the underwriters aren't taking stock.  Correct that typically all insiders and existing investors are expected to sign-up a lock-up. "When you enter into a multi-legged trade where one is a buy and one is a sell, the limit is expressed as either: The gist is that you don't care what each individual piece costs; you only care what the cost of the bundle is. When you put on a buy-write, you are buying stock and selling a (covered) call against that stock.  That trade will always cost money. Putting on a buy-write will always be done at a net debit.  This is because is is normally impossible for a call to be worth more than its underlying stock price.  There are a few possible reasons there would be a""net credit"" option for what's described as a ""buy-write"":" The only use of options that I will endorse is selling them. If you believe the market is going down then sell covered, out of the money, calls.  Buying calls or buying puts usually wastes money. That is because of a quality called Theta. If the underlying security stays the same the going price of an option will decrease, every day, by the Theta amount.  Think of options as insurance. A person only makes money by selling insurance, not by buying it. $15 - $5 = $10 How did you possibly buy a put for less than the intrinsic value of the option, at $8.25 So we can infer that you would have had to get this put when the stock price was AT LEAST $6.75, but given the 3 months of theta left, it was likely above $7 The value of the put if the price of the underlying asset (the stock ABC) meandered between $5 - $7 would be somewhere between $10 - $8 at expiration. So you don't really stand to lose much in this scenario, and can make a decent gain in this scenario. I mean decent if you were trading stocks and were trying to beat the S&P or keep up with Warren Buffett, but a pretty poor gain since you are trading options! If the stock moves above $7 this is where the put starts to substantially lose value. Investopedia has a good explanation of the term shorting which is what this is. In the simplest of terms, someone is borrowing the bond and selling it with the intent to replace the security and any dividends or coupons in the end. The idea is that if a bond is overvalued, one may be able to buy it back later for a cheaper price and pocket the difference. There are various rules about this including margin requirements to maintain since there is the risk of the security going up in price enough that someone may be forced into a buy to cover in the form of a margin call. If one can sell the bond at $960 now and then buy it back later for $952.38 then one could pocket the difference. Part of what you aren't seeing is what are other bonds doing in terms of their prices over time here. The key point here is that brokers may lend out securities and accrue interest on loaned securities for another point here. "I've traded covered calls now and then. This is a recent trade. Bought 1000 shares of RSH (Radio Shack) and sold 10 calls. So, I own the stock at a cost of $6.05, but have to let it go for $7.50. There's a 50c dividend in November, so the call buyer will call it away even if the stock trades below the strike. So, I'm expecting this is a 10 month trade for a 24% return.  This is one strategy where options clearly take down the risk (of course, I did not say 'remove', just lessens). The stock can be 10% lower a year out, and I'm still ahead by 8% plus the dividend if it's not canceled.  Note - it's a rare case for a one year trade to return 20% or more at a flat stock price. More common is 10-12%.  (I hope this example is acceptable as an example of this type of trade. If not, I can edit to ""XYZ corp"" to remove the stock name. (So if anyone comments, please do not repeat name in case I need to remove)" You sold a call, I trust? I bought a call. I have the right to exercise at my will. No sense if out of the money, of course, but if in the money, I might want to capture a dividend or just start the clock for long term gains. Once I exercise, you have no option (pun intended) but to let it go.  The assignment is notification, not a request for permission.