so I currentlu have some in the money covered call and was thinking of buying higher strike price call option. chatgpt thinks I am wasting my time
. Covered call + long call confusion (need clarification)
I’m having a debate about this and want a clean answer.
Position:
Long 200 shares @ 166
Short 2x Call 210 (covered by shares), premium 30
possible choice Long 2x Call 240, premium 15
So effectively: shares + short 210 call + long 240 call.
Scenario:
At expiration, stock price = 300.
My reasoning:
Shares are called away at 210 → profit = (210 − 166)
Long 240 calls are worth (300 − 240)
Short call is covered by shares, so I don’t see why it should be treated as an additional “loss”
Intuitively, it feels like:
I lock in the covered call profit up to 210
Then still benefit from upside above 240 via the long calls
Question:
Why is this position often described as equivalent to a 210/240 call spread, where total profit is capped, instead of “covered call + naked long calls” where upside continues above 240?
Specifically:
If assignment happens, the shares are gone — so why is the short call still considered a drag on profits above 240?
Looking for a payoff-based explanation, not just “that’s how spreads work.”