Selling covered calls LEAPS

Lets ignore the levels of IV 90 vs IV 360 and any higher level greeks....
The OP wants to hold TSLA for 10 years.Hes happy with a double which is why he would sell
the 1 year 1400 call...

It appears the smartest guys in the room are saying thats not the trade,you are far better off selling the shorter term options(and rolling)..If you think about that,they are saying the short term option is a far better sale that the 1 year. IMHO,that implies if they had to choose,they would choose to be long calanders,i.e short the higher decaying short term options and long the long dated.

But its not that simple..The OP wants to sell the 1400 call 1 year out with a 15 delta,trading at 25..If we compare that to the 11/19 1400 call,how many guys would sell that at .70,which is where its trading?? Would you sell a 75 day 1400 call for a .70 or the 1 year call at 25 ???
Gun to my head,I sell the 1 year..
Isnt that similar to how you look at a calendar??

What the smart guys MAY be saying is they would consider selling the a 15 delta call apx 3 months out over the 1400 call 1 year out with a 15 delta..

So now what are we really looking at?? We are looking at the diaganol...
The 76 day 15 delta call is the 930 strike and trades at 10 bucks while the 1 year 1400 call trades at 25...

If Im deciding between the 2 to sell,I look at the "synthetic" spread ,i.e the diaganol..Would you be short the 3 month 930 call,long the 1400 for 15 dollar debit?? How many rolls do you think you can get for 8 bucks plus??

Or would you rather be short the 1 year 1400 call and long the 3 month 930 for a 15 dollar credit??? Could TSLA move 50 percent in a month??

Does this make any sense??:)




morganpbrown said:
Please explain if you have the time and inclination. (Not a rhetorical request at all)
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taowave said:
Lets ignore the levels of IV 90 vs IV 360 and any higher level greeks....
The OP wants to hold TSLA for 10 years.Hes happy with a double which is why he would sell
the 1 year 1400 call...

It appears the smartest guys in the room are saying thats not the trade,you are far better off selling the shorter term options(and rolling)..If you think about that,they are saying the short term option is a far better sale that the 1 year. IMHO,that implies if they had to choose,they would choose to be long calanders,i.e short the higher decaying short term options and long the long dated.

But its not that simple..The OP wants to sell the 1400 call 1 year out with a 15 delta,trading at 25..If we compare that to the 11/19 1400 call,how many guys would sell that at .70,which is where its trading?? Would you sell a 75 day 1400 call for a .70 or the 1 year call at 25 ???
Gun to my head,I sell the 1 year..
Isnt that similar to how you look at a calendar??

What the smart guys MAY be saying is they would consider selling the a 15 delta call apx 3 months out over the 1400 call 1 year out with a 15 delta..

So now what are we really looking at?? We are looking at the diaganol...
The 76 day 15 delta call is the 930 strike and trades at 10 bucks while the 1 year 1400 call trades at 25...

If Im deciding between the 2 to sell,I look at the "synthetic" spread ,i.e the diaganol..Would you be short the 3 month 930 call,long the 1400 for 15 dollar debit?? How many rolls do you think you can get for 8 bucks plus??

Or would you rather be short the 1 year 1400 call and long the 3 month 930 for a 15 dollar credit??? Could TSLA move 50 percent in a month??

Does this make any sense??:)
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Wow, I am dumb, I did not see the strike of his intended short call. When he said “LEAP” I was thinking a deep ITM (80 delta) call, not a deep OTM (15 delta) call. (Is that still a LEAP?). A $25 premium on $720 shares seems like a rounding error to me. Why even bother? I’d be way more concerned with managing the overall downside risk on a $72,000 position than with collecting a few pennies betting against a black swan upside move.

But yeah, back to the point you make, I personally would rather always be selling options that are decaying with time, and this would be those 30 days or less to expiration. Though I have to confess I haven’t studied time decay on such low delta options. Closer to the money options have more extrinsic value to harvest decay from and would be preferable to me, especially if I’m hedging my shares
 
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Scataphagos said:
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! :)
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Well said Scataphagos. Only thing i would add is.. are you sure you will still be a happy camper if 6months from now tsla gets cut in half? Say at 350$
 
Are you suggesting he sell an equivalent Delta ,3 months out with double the theta??

Something like the 76 DTE 1000 strike??

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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kcgoogler said:
Well said Scataphagos. Only thing i would add is.. are you sure you will still be a happy camper if 6months from now tsla gets cut in half? Say at 350$


_______
Chaitanya Garikiparthi
Derivative Trader & Founder
www.siramcapital.com
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Yeah, well... that's the possible "fly in the ointment". If that happens, his $25 premium won't seem like much.
 
I'm gonna let you guys in on a little secret....

TSLA is not a stock. When you buy a share, you are basically buying a token to join in a game; a game that is controlled by a select few of the inner-circle, a game created to generate incredible wealth for those that already possess incredible wealth.

Keep it simple? I'll try. It's controlled by algorithms folks. Algorithms that are powered by degrees of artificial intelligence that were heretofore unheard of. They read billions of data points every second. Every option, every open interest, every trade, every short sale, social media sentiment, news feeds, etc.
Everything.

Wall Street bets, CNBC, Reddit, Robinhood, quarterly vehicle sales, earnings... all have absolutely nothing to do with it.
It's all math. Read that again... it's all math.
Sure it trades day to day in a range that to some degree reflects price discovery at any given moment, but look at the amount of money the open interest of all strikes and all expiration's represent.
I mean literally, it has to be at least a trillion dollars.
Probably more at $720/share.

When the boat gets too heavy on one side, or perhaps better said, when the berry has gotten fat enough, programed trading, controlled by these algorithms kicks in and they juice that berry for every drop.

Elon's in the inner-circle, but he's also a shill for when a big move is required. I'm surprised more folks can't see it for what it really is.
Bottom line, there's a very select few, call it what you want... the roots can be found in the so called Paypal Mafia, but that SV circle too has also evolved. These folks control this game and they DON'T lose money. They print it for themselves.

Trying to predict the stock direction, the best option trade, or just being a fan-boi of Elon, (which I am lol)... is an exercise in futility. Retail players, PM's... they can do all the DD they want... until you crack that code, you're just along for the ride...
... be $350 or $1400.
Its a dynamic thing and it will be determined strictly by the #'s.
-vz
 
Scataphagos said:
Yeah, well... that's the possible "fly in the ointment". If that happens, his $25 premium won't seem like much.
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Yep. And that is where all the risk is in the position. Often salivating on the possible profits is the cause for major losses. So first thing is to look at the risk. Play defense. Profits will come by..
 
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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If a stock I was long had sold off 30percent in one day, I would much rather have had a 1y buywrite than a 1week buywrite
 
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