MMM -- Close Out Call

I bought back the outstanding call, with the intention of selling the next weekly or monthly call either tomorrow or on Friday:

Stock Price	Date	Description	Total	xIRR
$81.91	2011-12-23	Sell 20 MMM 1/21 2012 $82.50 Call @ $1.45	$2,870.05	13.3%
$84.99	2012-01-18	Buy 20 MMM 1/21 2012 $82.50 Call @ $2.52	-$5,069.95	14.4%

When I've posted transactions like this before, a common question is why I was willing to accept a loss on the call. I don't see it that way. In the above call transaction, I sold the call for $1.45 of extrinsic value and bought it back when it had $0.03 of extrinsic value. So I've actually collected $1.42 of time decay on the call.

Although the "Total" column looks like a loss, note that I used to have 2000 shares of an $81.91 stock, but now own 2000 shares of an $84.99 stock. The change in intrinsic value on the call was offset by the increase in price on the stock.

Basically, the stock went up $3.08 in price, while the call went up only $1.07 in price. Since I already said I was willing to sell my shares for $83.95 when I sold the original call. any rise above that price is opportunity lost whether I buy back the call or not. In this case, $1.04 (i.e. $84.99 - $83.95). And note that the this $1.04 is the $0.03 extrinsic value I am paying to buy back the call, plus the difference between the stock and call appreciation (i.e. $3.08 - $1.07 = $1.01).

If I had wanted to close out the position, I would have simply let it get exercised at expiration date. So the call buyback is the cost I am willing to spend to be able to continue selling calls on the 2000 shares NOW, versus waiting until Monday to buy 2000 more shares and then sell calls on them. I consider the $0.03 per share to be worth the expense, especially since it should allow me to get more time decay on the next call I'll sell -- presumably earning me more than that $0.03.