Selling covered calls LEAPS

J

john7722

Hello, I am wondering if it is a good idea to sell covered calls that have a really long exp dates on stock that you decided to hold long term. I am not sure what strike price to choose .
Let say you have tesla shares that you wanna hold long term 10y or more.
Right now tesla is around $720 . I am thinking about selling sep 16 '22 call with 1400 strike price collecting $25 for each share in premium .

Thank you for your feedback.
 
1. I'm not an option expert... there are some on ET... let's see if they chime in. The strike you choose is subjective. No way to know which would be best next year.

2. Strategically, this seems like a good play.
a. You're betting TSLA won't double in the next 12 months.. and being paid $25/share to take that bet.
b. If your shares get called away, you still got to sell at $1400... AND you can buy back in if you care to... not to mention the $25 cushion you picked up should TSLA decline.

KISS, baby!

OK you option guys... if I've got this wrong, let me have it! :)
 
john7722 said:
That is exactly my reasoning I just couldn't explain it like you did.
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The option buyers think they are "getting a bargain"... betting $25/share that TSLA will cross $1425 within the next year. That's "betting on a 100+% gain in 12 months". For a conservative old trader like me, that just crazy!

Good KISS lesson here though... "Sell premium when prices are high, buy protection when prices are low".
 
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Perceptions can differ. On a stock like tsla there will always be a time to buy. Holding a covered call for a long time will lock the capital you can use for pursuing something else when needed.
A premonition to hold tsla has emotional part with it. Trading and emotions don't goo too well.
Short term calls are perhaps better than long term for that reason.
 
traider said:
Decay is too slow for long term. Try it and you will see. Doesn't justify the risk of a crash while you are bagholding shares
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OP said he was "long term holder". That premise deserves questioning.... especially with something like 25 EV companies in China being near to coming into the marketplace.
 
traider said:
Decay is too slow for long term. Try it and you will see. Doesn't justify the risk of a crash while you are bagholding shares
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Correct. Explain to him the basics, the painful with a specific example if you are so inclined.
 
Penysnatch , but I already own tesla. I wanted to sell a covered call. I would be OK to double my money and sell it at $1400 .
 
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