Rolling a call option

My covered call position in EEE was deep in the money, so I took a look at the numbers to see if I could/should sell out the position early. The stock traded today in the range of $10.01 to $10.49, closing at $10.48. I have 200 shares and had sold 2 contracts of the Feb $7.50 calls. These calls were trading with no or very little time premium.

After much calculation and test trades, I put in a spread trade, buying back my Feb $7.50 call and selling a Mar $10 call for a net debit of $1.30 + commissions. The trade was filled paying $2.94 for the February call and getting $1.64 for the March call.

I only did one contract, due to low cash in the account, thus not enough for a pair of contracts. Besides I feel pretty good holding onto some of my deep in the money position for 3 more weeks.

Using the share closing price to figure the return, the closed option position earned 16.6% for 43 days, converting to a 143% annual return. The new call position has a projected return of 11.8% for 47 days if called.

My investment in EEE has done very well for me. But this is a very volatile stock, swing 5% or more on many days. Fortunately, I bought in-the-money calls, and the stock has stayed in the money the whole time. The company does have a good story for clean energy, but isn’t making any money yet.

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