Establishing Our Cost-Basis for Long-Term Holdings

[The Option Specialist]( 03/08/2021   |   [View in browser]( --------------------------------------------------------------- [Establishing Our Cost-Basis for Long-Term Holdings]( When we initiate a covered call trade by first buying a stock and then selling a call option, our cost-basis, in the BCI methodology, is the lower of the stock price or strike price. If we sell an in-the-money (ITM) strike, we deduct the intrinsic-value component of the option premium from the share price bringing our cost-basis down to the ITM strike price. When we sell at-the-money (ATM) and out-of-the-money (OTM) strikes, the cost-basis is the stock price. This is all pretty straightforward but what if we have previously executed covered call trades with this stock and retained it in our portfolio? What if we decide to write calls on stocks we've held for long periods of time and are now at a much lower cost-basis than current market value? 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