Tesla Short calls

 30 oct

as most of my online friends know i own deep in the money leaps and sell short calls near dated for premium.. the intent is that the short call premium is the money maker. price appreciation via the leaps is gravy.

as weve all seen , TSLA has taken off the last 2 weeks and would have blown thru the top range of any short calls i would have had or rolled to. regardless, what to do now. last week i had the Oct29 905 short calls , a 6 lot, with stock around 1050 ... way above my short calls.

so at the current premiums i could only roll up and out a week to the 910s and it not be a debit.. whether its 905 or 910 doesnt matter much as far away the stock is so i decided to roll to Nov05 905s to get max credit. on down days the premium improves in my favor, on up days i would get less premium to roll. i checked every day last week and the premium was between 4 and $8.50 credit.. at one point i believe wednesday i entered an order at $8.35 credit and was at midpoint right before closing with no fill.

i expected a pullback in morning so i increased the premium to $8.50 GTC order since i would not be behind computer in morning. i didnt mess with the order and yesterday im with a customer and i get the confirmation emails that 5 of the 6 lots filled at $8.50. i logged in 15 min later and the midpoint was about $4.50. cant explain what happened but i will take it. score one for the little man. i closed the 6th lot at $4.85 in the afternoon.

now the point of all this is that even with the stock nearly 200 points out of the money near 1100 i was able to roll my 6lot position for between $4.85 - $8.50 for $3000+ for a week. the ideal time to roll is on big down days, if stock drops 50 points and the IV increases i might be able to roll from 905 to 925 and still get small credit but until that happens the question is (and the answer may not be the same for all based on your short call strike and what else you have going on) is the $3000 for a week worth it to stay as is?.. as in roll 905 to 905 to 905 maybe the occasional roll up 5points

if the stock keeps going higher and higher that $3000 credit to roll will do down and down so at some point you might decide youre commiting xyz dollars and only getting $750 to roll so you reset the positions. 

but im also still expecting a gap fill at some time, sooner than later would be helpful so for the moment a 905ish short call is ideal for a gap fill to the 900-910 area.

so to answer my own question. that $3000 credit and some short put sales/credit put spreads added in there is enough per week

Tesla Reset 21 oct

 

21 oct

ok meow.. the least desirable action to happen if you use the buy deep in the money Leap and sell near dated upside calls for premium strategy.. also called the poor mans covered call... is for the stock to just take off thru your short call. and i dont mean just 10-20 bucks in the case of tesla.. like 75+ . 

Note how last week the stock was under 800 with delivery numbers fresh. i made the decision to roll from 765 to yesterdays 765 for huge premium with the expectation that would be a sell the news action from earnings. got that wrong obviously or maybe early but have to deal with expirations here and now so a 100 point sell off next week doesnt help.

the guideline i use is first see if i can roll the short calls up and out. the 765s to go to next weeks 770s would be a debit and roll flat to 765s again was midpoint about $2,75 credit when i looked.. remember its an 11 lot so about $3000 credit for the roll. if stock pulls back that week to week roll from 765 to 765 credit would improve, if you get a big selloff its an ideal time to roll up and out as premiums spike you may be able to roll for 10-25 points.. 

also keep in mind i have Jan2022 Leaps although profitable via stock appreciation are also decaying at a tiny increasing rate going forward cutting into that $3000 credit. so the decision is do i stick it out rolling week to week for assuming $3000 per (which is not chump change compared to my actual take home from my full time job) or can i make adjustments to "get back in the game" and get back to selling juicier premium.

I call this "doing a reset" . i seem to have to do it 2-3 times a year and im thinking does not come naturally to newbies who will likely just take a huge loss and move on. so here it is

Short version is to "buy to close" the 765 weekly short calls but instead of using up my cash cushion i instead "sell to close" enough Leaps to pay for the "loss" on the calls.. ie take the loss on the calls, take profits on the Leaps.. which Leaps is up to you but mine are Jan2022 -Jan2024 opex.. i mentioned that the Jan2022 leaps earlier. one way or another in the coming months i would have had to take some kind of closing action on those anyway so i picked those Leaps to take profits in .. your broker might be different but etrade "cancels" 3 leg trades where i try to close all 11 calls, sell 5 Leaps but with 2 different opexes .. so have to break them down into 3 separate trades.. 

close 4short calls, close 2 Leaps Jan2022 at 650strike, close 4 calls and close 2 Leaps Mar2022 650strike, and close 3 short calls and close Jan2022 700strike ... it doesnt have to be precise, you are losing some with the wider bid/asks , some end up slight credit, some slight loss. im just trying to avoid a huge cash outlay so a couple thousand "net loss" and all 3 transactions is same same for me.

so i closed 11 short calls but only sold 5 leaps therefore i have 6 leaps uncovered (no upside calls again) so with stock in 880s sold:

6 Oct29 905 short calls at $10.25 per -- 

just the quick math you can see i took in $6000+ after all that reset vs $3000ish on a roll 

Now im back in the game with short call near the money. account balance unchanged, cash balance essentially unchanged and able to sell puts etc

All this is unrelated to the buy write i had going as same time but intent was to let that expire/get called away for the "guaranteed" profit.

as i have conversations online with people about buy leaps/sell calls strategy the number 1 response or question or concern is what happens if stock takes off.. first off the short call level is up to you, i sell a bit closer to at the money than most people it feels like and there are those that sell a 2-3 delta for $100 bucks. there is a middle ground somewhere thats your comfort level.. whether thats a delta level or a dollar level.. start with 20 or so delta.. get a feel for how the stock moves, sometimes go higher delta or lower.. that move thru the short call type action does not happen often or out of the blue. tends to be from an event. .earnings, an announcement, deliveries etc . point being is if stock takes off there is no need to panic or lose sleep, you just made less than before. reset like i did if you have multiple leaps or close out the entire position and start over. get back to a position where you are bringing in premium