that the 405-strike call is farther out-of-the-money and will lose its value
before the 395 call.
Say that after two weeks a big downward move occurs. Apple is trading at
$325 a share; the 405s are 0.05 bid at 0.10, and the 395s are 0.50 bid at
0.55. At this point, the lion’s share of the profits can be taken early. A trader
can do so by closing only the 395 calls. Closing the 395s to eliminate the
risk of negative delta and gamma makes sense. But does it make sense to
close the 405s for 0.05? Usually not. Recouping this residual value
accomplishes little. It makes more sense to leave them in your position in
case the stock rebounds. If the stock proves it can move down $70; it can
certainly move up $70. Because the majority of the profits were taken on
the 395 calls, holding on to the 405s is like getting paid to own calls. In
scenarios where a big move occurs and most of the profits can be taken
early, it’s often best to hold the long calls, just in case. It’s a win-win
situation.