Hello again. Hi Lance,
I have been reading all of your posts per your suggestion from yesterday. This particular thread is interesting.
If you have a stock that is rolling, say $25-$30, you could sell the $30 strike when the stock is approx $30, and buy it back when the stock is approx $25.
Sure you can, but why bother? You'll make a lot more money by trading the stock.
So the question is what strategy are you talking about? If it's a covered call - then yes, your idea is excellent. But stocks that behave that way do not do so forever. One time it's going far past 30 or far below 25. Who know when that will be? So you can do this as often as the stock behaves.
So, you can do this an unlimited number of times within any expiration period if one was so lucky to find and own this stock? Yes. But at some point you will want to stop trading the current expiration and move on to the next. perhaps with less than 2 weeks remaining; or perhaps one week. You will have to decide for yourself - when the time comes to sell a new option - which one to sell.
Trying to cement in my mind the assurance of 'buying to close'. It's justs terminology left over from earlier times when you had to tell the broker if the order was opening (new position, or adding to an existing position), or closing (eliminating, or reducing a position). Nowadays the broker's computer easily gets that information. But the terminology is still used, and many people find it a useful piece of information.
Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options
Free eBook: http://www.mdwoptions.com/freebook.pdf