selling call options in illiquid options market

[options2020]

I think I may have made the mistake of posting in the "First Post" forum:

http://www.trade2win.com/boards/fir...ions-illiquid-options-market.html#post1847916

Since my question is specifically about options, I am re-posting it here now with slightly better organization.


The situation:

I have a number of call options in a stock which I expect to go up in coming weeks.

Expiry is in a couple of months.

My intention is to eventually sell some of the call options - and use that cash to "exercise" the rest so I have some long term holdings of the stock as well.


I have figured out what the price points will be to finally have X number of shares of the stock - at various stock prices (even if call options sell for just the "intrinsic value").

I am assuming in my model that I will get "intrinsic value" of the call option when I sell (if I do better, that's good).


My concern:

I am concerned however, that if the stock rises fast, the call options bid prices may not move as fast that day (or the market makers may simply refuse to buy at even "intrinsic value" type prices).

For this reason, I thought that as a last resort I could always SHORT the stock whenever I see the stock price go high (and if the call option bid prices are not reflecting that).

An equivalent call option could be "exercised" (by paying strike price) to cover the short.


This would in effect ensure that I can AT WORST get "intrinsic value" at least from a "sale of a call option".

The stock price minus the strike price would ensure that the "intrinsic value" can always be extracted - at the point where I feel the stock is highest (for example).



Question 1:

My question is, how do I get my broker to allow me to short the stock (i.e. offer the call option as collateral to show the broker that I can always replace what I short by "exercising" the option esp. if I sell short at a higher-than-strike-price).

I am currently using etrade - hoping to get back from them on this - but if they do not allow this (i.e. "you do not have sufficient buying power" type of thing), do people know of brokers who WOULD allow this type of arrangement - Schwab, or Interactive Brokers ?

I could then move the options over to the new broker who does support such a strategy.


Question 2:

Am I correct in my presumption that in an illiquid call options market, one may be unable to get a good price when "sell to close" of a call option. And that it may get so bad that one may not even be able to get the "intrinsic value" for the stock (for example if the stock has risen much that day and the options prices have not kept up).

 

[options2020]

Although, come to think of it, one would think the market makers would have automated programs to do EXACTLY the thing I have mentioned above - i.e. if someone wants to sell their call option then to ALWAYS be ready to buy the option (maybe at slightly less than "intrinsic value") so they can do what I just outlined above and get a commission for making easier for someone like me.

So can it be said that AT WORST one can ALWAYS sell a call option to a market maker at something close to the "intrinsic price" or maybe slightly lower ?

Or is original presumption correct that illiquid market could leave you no one to sell to at that time - thus necessitating the need to sell short/"exercise" the call option yourself.