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

Change to Tesla Position

 

15 sep

friends, this is a bit longer than multiple tweets so... 

Started the day with long 15 leaps ranging from Jan 2022 out to Jun2023, from 650 strike up to 750 strike. to go with those are 13lot short calls 780 Oct 08 strike, one 765 Oct08 and one weekly 755. 

Although im comfortable with my long thesis my account balance after adding leap 15 is low enough i cant do much else right now outside of some spreads... Put selling is my top go to trade and i prefer to do the put selling on something im already long. ie Tesla. , point being not enough cash in account to do that.

A smaller part of todays thought process is that if market does turn lower (what that really means for me is Tesla since im super overweight on that stock) , that i dont have anything to put to work. big down days are ideal to add a Leap, do a risk reversal (sell put, buy call) , or just outright Put sales.. i could put a couple weeks together of added short call premium but that doesnt help me now.

An additional item to consider is taxes.. of those 15 Leaps, three of them were purchased in april about when stock was 702 according to my notes. they are the Jan2022 710 strikes.. you might see where im going... me along with many expected tesla to continue an upward move all year and thus come opex time (jan2022) those Leaps are in the money and profitable.. such as stock is at 900-1000. what you are fighting all year is time decay against you just like the time decay works for you on the short calls. so you need that leap to gain in value just enough to offset the time decay.. long story short , at some point im going to have to do something with my Jan2022 Leaps. converting into stock has never been something ive wanted so take that off the table. if i had that much cash to begin with i would just be doing stock buy writes. As of today those Jan 710 leaps still have $6000 of time decay left (against me). Although since purchase my short call premium has been in excess of the Leap time decay im working against my own leap the closer to Jan opex approaches

so it was either best case take profits in Jan or roll out another year or two, maybe have to throw some more cash into it for a roll. Bottom line the Leap is a mark to market loss right now. i can use those losses against my gains for taxes. ive had another pretty good year with tesla so need something to help offset some gains.

so combine all that together... the lack of flexibility to do any other significant trades (short put selling / adding a Leap on a huge down move, etc) and being able to get a tax benefit. Heres what i did:

-the weekly 755 i sold yesterday i bought back today for about $50 loss (that frees up one uncovered Leap)

-the Oct08 765 short call, bought that back at about 30% gain from entry (frees up another leap)

So that leaves the 13lot 780 short calls intact Oct08 opex

-then i sold 2 of the jan2022 710 calls at about $10100 ish each

I did buy writes recently, both were profitable at eventual exit.. so for remainder of week bought 100 shares common and sold 740 short call against at $15ish.. net net if stock is above 740 friday the stock is called away essentially at 755ish for near $400 for sitting on hands. 

having that cash on hand if needed on a down move i can buy Leaps for 2023 or do short put selling. doing buy writes is obviously simpler especially if youre not worried about having shares called away and is easier to manage but the money maker is having multiple short calls paying me. 

seems like we are overdue for a pullback, either market or tesla specific so i need to be more flexible but still have exposure. next month or two will be doing something similar to the remainder of my Jan2022 leaps.

$TSLA roll down and UP he said??

 

9july -- ok friends, too much to tweet so put it on here. been months but here we go, put on your helmet.

some of my twitter friends have noted that i had previously Jul30 710 short calls that i also rolled to the 700s for credit. today i rolled those 700 short calls to the Jul23 672.50s... move up to an earlier opex is a first for me. heres the thought process...

i have 11 Jan2022/2023 Leaps on tesla at various strikes, most are out of the money, having purchased when stock was higher. Selling short dated calls against those for premium is easy if you stay at the same strike price as those Leaps. No additional buying power needed, if you sell a short call at a lower strike then some buying power is needed.

few months ago the stock was under 600 so at that level in order to sell short dated calls against my leaps i needed alot of buying power or i needed to stay as close to the strikes of the Leaps...say 700 for discussion.. so selling 600s short calls could be done but could not do 1 for 1 against the leaps... could not sell all 11. only 5-6. when stock recovered closer to 700 i could sell 1-2 more. then it dawned on me.. .instead of selling weekly short calls with the remaining slots , to go out further in time and higher strike. so go 5-6 weeks out and sell 700s or so. thus being back to near same strike as long leap and not needing more buying power.. 5-6 weeks were needed to get decent premium. weekly premium for 700 strikes was $1-2 per... not really worth the effort.

in hindsight my rush to accumulate the leaps caused me to use up the buying power that could have been used to sell Puts or for short calls if stock drops like ive described.. should have not bought that 11th Leap.. regardless here we are and stock has recovered to 650+ and im looking at my short call positioning. with 30min to go before opex today i had

   6 Jul 650 short calls and 5 Jul 30 700 short calls (21 DTE)

got me thinking that i wish i had all eleven short calls for next week to get the maximum decay, then roll to Jul23, then roll to Jun30... i was not getting any participation of those 5 short calls for next week or Jul23 week.. i was losing out on decay and a roll for credit for 2 weeks. yes the 700s would decay as well. i was only at the Jul30 opex because 2 months ago i didnt have buying power, not really by choice.. 

i could have rolled the jul30 700s to next weeks 650s to match my 6lot but that would have again taken up more buying power that right now id rather have for flexibility. so i looked at 2 weeks out the Jul23 week (includes earnings) and adjusted the strikes on etrade until i came up with a slight credit... that was the Jul23 672.50 strike (so move up a week and down 27.50 points) for .25 credit. meaning that if stock is under 672 at opex i capture all the premium ( $19ish i believe it was)... but i capture it a week earlier than if i would not have rolled down.. this allows me now to sell another new 5lot batch for the Jul30s after the Jul23s come off the board.. bottom line i gained another weeks worth of opportunity to put on a 5lot of short calls.. would be kick ass if at that time the stock was in a position where i would want to resell those same 700 strike calls. 

make sense?