Wiki Selling TSLA Options - Be the House

[adiggs]

July 23 puts have a very high premium. It seems like the market thinks that the earnings report will be that week. I think it’s less than 50% chance of that - more likely July 26 or 28 will be the date. Either way, you can sell $450 puts for $5, $500 puts for $7 and $550 puts for $10. I like selling way OTM puts like those and these are great premiums.

With the move down today to the low 640s (when I acted), and with the new mantra that goes through my head whenever I'm making decisions (this is for income!), I decided to close my 500/600 put spread expiring this week. The net was around .40 out of 2.00, thus a 25% profit. My thinking was that two more $20 down moves and my far OTM spread is now ATM and since this is for income I decided to just call it quits on this one. A lack of excitement is an important component of my position choices.

With a pointer from somebody else, I replaced that with a 430/530 put spread for next week and a 3.35 credit. I like being that far OTM even a week and a half before expiration - much better than the 500/600 for this week.

 

[Yoona]

my BPS is more gun-shy, so it's at 7/9 +p610/-p640, 20Δ

20Δ became 43Δ, so i rolled it to next wk for $10k credit

 

[pz1975]

October 2020 has the same calendar as this month. Earnings were on the 21st.

Fair point. Even if ER is the week of July 23, I still think it is very unlikely the SP moves to $450/$500 considering the numbers will almost certainly be good and it didn't get near those levels back during the recent dips.

 

[bobscof]

this is very interesting, i want to add it to my list of playbooks coz you got my attention at "I am making money no matter what the stock price does".

what is an example of a "bundled transaction that buys back my Put or Call and resells for a higher price"? Assume a covered call -c680 for this Friday that I decided to roll.

thanks in advance!!!

Schwab brokerage, in its option trading selections, has a "rollout" where you list the option you want to close (in my case it is usually a buyback), then the date and option value you want to replace it with (usually a sell). It lists the net cost (debit) or credit range for the combined order. While near term transactions are often a debit, if I stretch the date out a few weeks or months, I can usually receive a premium for the combined order, The order is never finalized until both halves are filled. So, instead of taking a loss when an option expires, by stretching out the time I can put more money in my pocket. With TSLA options I am always amazed by the high premiums that are paid for each option. My rule is to never buy an option, but to always sell, which causes me to always make money as the premium on the option declines.

 

[bobscof]

When did you start doing this? The problem here is that you may be making money now because the stock really isn't doing anything. But you almost would of certainly lost money if you started in early February since your put would be for $790 or something and you would still be trying to sell that stock with covered calls.

Alternatively last year, you would of done great, until TSLA had massive rallies where the stock price doubled. A similar example recently would be NVDA. Grabbing NVDA at $580 then selling at $600 would of seemed like a great play with options premium on top. Except now it's 800 and somehow selling a $810 put does not seem like a good idea.

Basically your strategy works until it doesn't. And while currently you make money no matter what the stock does. There are prime examples of it works until it doesn't over the last year.

If the price starts to move significantly up or down against me, when I do a rollout, I roll into a price nearer to where I need to be. I've found I can do that at a net credit, and after a few rollouts, I get close to the current market price without ever having to have the puts exercised at a disadvantaged price. Plus I've picked up some nice premiums along the way. Sometimes I let the puts be exercised if I want to buy more TSLA shares, but the premiums have usually made up for the difference in price. So, no matter if the price goes up or down, I can adjust to the movement and still make money.

 

[CHGolferJim]

Schwab brokerage, in its option trading selections, has a "rollout" where you list the option you want to close (in my case it is usually a buyback), then the date and option value you want to replace it with (usually a sell). It lists the net cost (debit) or credit range for the combined order. While near term transactions are often a debit, if I stretch the date out a few weeks or months, I can usually receive a premium for the combined order, The order is never finalized until both halves are filled. So, instead of taking a loss when an option expires, by stretching out the time I can put more money in my pocket. With TSLA options I am always amazed by the high premiums that are paid for each option. My rule is to never buy an option, but to always sell, which causes me to always make money as the premium on the option declines.

So the question is are the btc and sto transactions actually tied together, or just made to appear to. Maybe it's semantics if the prices are both locked in and the credit/debit defined before execution.

 

[adiggs]

If the price starts to move significantly up or down against me, when I do a rollout, I roll into a price nearer to where I need to be. I've found I can do that at a net credit, and after a few rollouts, I get close to the current market price without ever having to have the puts exercised at a disadvantaged price. Plus I've picked up some nice premiums along the way. Sometimes I let the puts be exercised if I want to buy more TSLA shares, but the premiums have usually made up for the difference in price. So, no matter if the price goes up or down, I can adjust to the movement and still make money.

I just want to make an observation - your general approach has also been nearly my own observation. But it doesn't always work this way - there isn't such a thing as free money.

In particular a large and fast move towards your position (down for puts, up for calls), even with aggressive rolling on your part, can still leave you deep enough ITM that there aren't any rolls available that do anything other than stay with the same share price and generate a small net credit. An example was Feb of this year where we went from 800s down to 600s in a few weeks. In my case I rolled down to 760 and have been there for 4 months waiting for the shares to come back. They haven't of course and even when we were close to 700 the last few days I needed to roll 3 or 4 weeks to get a 1 strike improvement (760 to 750).


I.e. - it works until it doesn't. I'm in complete agreement that this is a high win % approach as long as you're ok with positions sometimes taking a month for the credits to turn into realized p/l, and accept the ever increasing loss along the way until the shares finally reverse. Frequently just 1 or 2 rolls, the shares reverse, and you're golden. But not 100% / always.

 

[adiggs]

So the question is are the btc and sto transactions actually tied together, or just made to appear to. Maybe it's semantics if the prices are both locked in and the credit/debit defined before execution.

They are two different transactions but on a roll ticket neither executes unless the other does. And the limit on the ticket is the combined result of the two. So if you're doing something for $3 net credit, it doesn't matter if the BTC is $1 and the STO is $4 or if the BTC is $2 and the STO is $5. Either way you get a $3 net credit and until some other party is ready to take the other side of your combined trade nothing happens.

And this isn't a means for dodging commissions You'll pay 2 commissions on a roll (the BTC and the STO) unless your broker has qualifiers (Fidelity does free BTC on <$0.65 options for instance).


At least Fidelity in your trade history you'll see a BTC for 1 position and then a 2nd line for the STO for the 2nd position. The BTC will generate a realized result (a loss when you're rolling out of a losing position) and the STO will start a new position that is large enough to account for that loss plus the credit.

 

[MrMoo]

If the price starts to move significantly up or down against me, when I do a rollout, I roll into a price nearer to where I need to be. I've found I can do that at a net credit, and after a few rollouts, I get close to the current market price without ever having to have the puts exercised at a disadvantaged price. Plus I've picked up some nice premiums along the way. Sometimes I let the puts be exercised if I want to buy more TSLA shares, but the premiums have usually made up for the difference in price. So, no matter if the price goes up or down, I can adjust to the movement and still make money.

What I found problematic about this rolling strategy is opportunity cost. So i'll give you my example on my non trading account:

I sold covered calls at $600 a share late last year, the run up became insane and unmanageable so i rolled and I rolled and by the time the stock was in the 800's I had rolled so far away that I was basically almost at leaps lol. Now here is the problem, I can no longer sell my shares (or risk having naked leaps) and I can no longer sell covered calls for months on end. You actually end up making more money taking the loss, waiting for the stock to level out and then selling weekly CC's. Those rolls you do give you a few hundred or a thousand in credits but the time value of them becomes obscene and it stops you from selling calls at better strikes. In the end the CC's I sold did expire worthless but I'm also down about 100k in profits given I didn't sell anymore CC's until June on my non trading account and I held all the way down.

I don't have experience on the put side but i assume it's a similar situation of playing roll the put, which could take months to roll down. Where as if you just sold far OTM Puts week on week, you could potentially make the same amount of money. There is a post above me that has puts at 760 for 4 months. That is ages, how much more premium could you get from 4 months of puts at say a strike of 550.

Anyways long story short, as long as the price doesn't move a lot you are golden. But once the price starts shifting, the rolling strat won't get you out of hot water.

 

[buttershrimp]

They are two different transactions but on a roll ticket neither executes unless the other does. And the limit on the ticket is the combined result of the two. So if you're doing something for $3 net credit, it doesn't matter if the BTC is $1 and the STO is $4 or if the BTC is $2 and the STO is $5. Either way you get a $3 net credit and until some other party is ready to take the other side of your combined trade nothing happens.

And this isn't a means for dodging commissions You'll pay 2 commissions on a roll (the BTC and the STO) unless your broker has qualifiers (Fidelity does free BTC on <$0.65 options for instance).


At least Fidelity in your trade history you'll see a BTC for 1 position and then a 2nd line for the STO for the 2nd position. The BTC will generate a realized result (a loss when you're rolling out of a losing position) and the STO will start a new position that is large enough to account for that loss plus the credit.

That’s some good info, I’ve been seriously annoyed with the changing ratio rolls…. Say rolling 10 contracts to 5…. Doesn’t execute fast and you can lose an opportunity.

 

[adiggs]

That’s some good info, I’ve been seriously annoyed with the changing ratio rolls…. Say rolling 10 contracts to 5…. Doesn’t execute fast and you can lose an opportunity.

At least based on my experience with Fidelity I would expect these changing ratio rolls to need separate tickets (close the 10, open the 5) or at least a 5 for 5 roll followed by the appropriate transaction for the remaining 5. I needed to do something like this on a split-flip - the flip went smoothly (probably because the contract count was equal) but the split had a harder time with the fill.

Or just do a market order and know you'll get the worst side of teh bid/ask on every contract. That should fill!

 

[CHGolferJim]

• No longer concerned about the 070921C685 and C690; will let expire unless it is somehow worth it to roll to lower prices for one day for beer$
• With this week's turbulence and the possible SP pop from FSD and 2Q P&L, is it rash to write some 082021C705 and C750 at $15-$25 = 6 weeks of average weekly returns above YTD with time to roll and boost if SP recovers to $700 anytime soon
• Astute or playing with fire (or both!)?

 

[jeewee3000]

This stock price is ridiculous. On tuesday I BTO a JUN2023 LEAP (strike 1400) as a 'trade' (i.e. not meant to hold till expiration, just to sell around ATH/900.

Yesterday I bought some friday 700 calls thinking I could get a quick doubling of my money but boy was I wrong with today's price action Sold these for 75% loss today, remembering I shouldn't gamble by buying weeklies.

Today I sold a JUN2023 400 put with the same intention as the LEAP. I'll buy this back when we get back to regular trading levels (in my view 700 at least, rather 800 or above). The sooner the better but by doing this with LEAPS I'm not stressed if this insane price action continues for a while.

Selling calls is out of the question for me at these prices before earnings. I know about IV crush after earnings but given how low we are there must be a pre-ER runup before I consider selling calls expiring after ER.

 

[jeewee3000]

• No longer concerned about the 070921C685 and C690; will let expire unless it is somehow worth it to roll to lower prices for one day for beer$
• With this week's turbulence and the possible SP pop from FSD and 2Q P&L, is it rash to write some 082021C705 and C750 at $15-$25 = 6 weeks of average weekly returns above YTD with time to roll and boost if SP recovers to $700 anytime soon
• Astute or playing with fire (or both!)?

Personally I think the 705 call expiring in august is almost guaranteed to end up in the money. 750 not so much, but still possible.

Been following this stock since 2014 as many here and we all know that - when TSLA starts to rally - things can go very quick.

All it takes is one week of good news (few catalysts combined) to send this stock to ATH. For example:
- AI day shows a side of the business analysts hadn't thought about;
- FSD subscriptions start in two weeks and Tesla announces on the ER how many subscribers signed in from Day 1 (and this number is massive);
- Tesla announces a new GF;
- Tesla announces an expansion of their insurance business to entire US.

Whatever it will be, there will be a catalyst sending this stock higher. Current sentiment on the investor board is that it'll take Q3/Q4 results and/or Texas and Berlin to chime in for that to happen, but stock price rallies have never been pinpointed with accuracy beforehand.

Not to derail the "The Wheel" thread, just saying I'm personally not selling calls as long as this stock hasn't had some nice green days making me feel safer about the rest of the week.

 

[dc_h]

• No longer concerned about the 070921C685 and C690; will let expire unless it is somehow worth it to roll to lower prices for one day for beer$
• With this week's turbulence and the possible SP pop from FSD and 2Q P&L, is it rash to write some 082021C705 and C750 at $15-$25 = 6 weeks of average weekly returns above YTD with time to roll and boost if SP recovers to $700 anytime soon
• Astute or playing with fire (or both!)?

Depends on your appetite for risk and willingness/happiness to sell at a price. Longer term CC's are usually at prices I am ok to sell at, or where I think I can buy back at, or where I think a breakout is happening and I want to buy leaps to leverage the upside. I'm trying to stay conservative beyond earnings, which are now looking more like July 26th or week of the 26th, versus earlier July 22nd forecasts.
To pickup added credit this week, I rolled open CC's down to lower strike prices. I may yet regret, but rolled cc@680 down to 665. That is a small credit .70 per contract at the time, but seems/seemed like very low risk.
I personally think earnings could be a catalyst, not just beating the street estimate, but any announcement about adding capacity or sales targets for the rest of the year. Preliminary reports out of Shanghai point to increased capacity and sales of a new MIC SR Model Y. I expect that will increase MIC MY deliveries to increase production and deliveries for Q3 significantly in Q3. 250,000 deliveries in Q3 is not out of the question, but success selling cars and making money has not always equalled a change in short term market value.

 

[Tslynk67]

What I found problematic about this rolling strategy is opportunity cost. So i'll give you my example on my non trading account:

I sold covered calls at $600 a share late last year, the run up became insane and unmanageable so i rolled and I rolled and by the time the stock was in the 800's I had rolled so far away that I was basically almost at leaps lol. Now here is the problem, I can no longer sell my shares (or risk having naked leaps) and I can no longer sell covered calls for months on end. You actually end up making more money taking the loss, waiting for the stock to level out and then selling weekly CC's. Those rolls you do give you a few hundred or a thousand in credits but the time value of them becomes obscene and it stops you from selling calls at better strikes. In the end the CC's I sold did expire worthless but I'm also down about 100k in profits given I didn't sell anymore CC's until June on my non trading account and I held all the way down.

I don't have experience on the put side but i assume it's a similar situation of playing roll the put, which could take months to roll down. Where as if you just sold far OTM Puts week on week, you could potentially make the same amount of money. There is a post above me that has puts at 760 for 4 months. That is ages, how much more premium could you get from 4 months of puts at say a strike of 550.

Anyways long story short, as long as the price doesn't move a lot you are golden. But once the price starts shifting, the rolling strat won't get you out of hot water.

I need to ask a really dumb question here, forgive me. Yes, I'm used to selling calls and puts, but still relatively new to the whole rolling thing

It's my observation that the a strike one week later is always a higher premium than the same strike for this. The closer to the money, the higher the delta, so DITM calls/puts have less between them, but still something, go out another week and it becomes a lot more, enough, I would say to take the free roll 2-3 strikes closer to the money

So what's to stop you doggedly rolling, week after week to a slightly higher strike until the point comes when the SP dips and the position goes OTM, or cheap enough that you just close it out? Might take a year, and during that time you may not make any premiums, but eventually you'll catch up, no?

My experience this year has been that closing out DITM positions and re-establishing new positions ATM or OTM, has led to big losses, had I just rolled up/down a bit, the SP always came back - I would probably be $250k more profits had I done this

I can imagine that had you sold covered calls just before the split, it might have been difficult, but even then, after the S&P snub, the SP came back a lot, had you been rolling up weekly, you likely would have closed out the calls, and I think another run like last year to be very unlikely to happen again

One caveat I don't have a margin account and only sell what I can cover, so a margin call isn't and issue

 

[adiggs]

I don't have experience on the put side but i assume it's a similar situation of playing roll the put, which could take months to roll down. Where as if you just sold far OTM Puts week on week, you could potentially make the same amount of money. There is a post above me that has puts at 760 for 4 months. That is ages, how much more premium could you get from 4 months of puts at say a strike of 550.

Yep - its the same on the put side. I got caught on the other side of the run up that got you.

• No longer concerned about the 070921C685 and C690; will let expire unless it is somehow worth it to roll to lower prices for one day for beer$
• With this week's turbulence and the possible SP pop from FSD and 2Q P&L, is it rash to write some 082021C705 and C750 at $15-$25 = 6 weeks of average weekly returns above YTD with time to roll and boost if SP recovers to $700 anytime soon
• Astute or playing with fire (or both!)?

Yes!

I don't actually have an opinion one way or the other. I do have this to add though - if I am going out beyond 3-5 weeks or so (and I mostly line in 1-2 week land), then I'm only selling a strike that I am actively ready and willing to take assignment on. In your question I would only sell the 705s or 750s if I'm ready to take assignment.

My logic is that in 6 weeks it is possible (though I personally consider it unlikely) that the shares will move a LOT. Somebody else mentioned catalysts that could have that effect. Or TSLA - that is frequently a good explanation as well. When you start with a 6 week option and then decide that you need to roll, the available rolls won't be as good when going from 6 weeks out to 8 weeks, compared to going from 1 week out to 3 weeks. You'll be giving up the ability to make changes to the position.

So what's to stop you doggedly rolling, week after week to a slightly higher strike until the point comes when the SP dips and the position goes OTM, or cheap enough that you just close it out? Might take a year, and during that time you may not make any premiums, but eventually you'll catch up, no?

In theory yes. As long as you fully own the backing (no margin calls to trouble you) AND as long as you can have that backing tied up in the position for an open ended period of time (no home purchases that require pulling out the backing for instance ), then yes - you can roll ~forever.

Well - as long as the shares do come back. In the case of a sold put then that isn't something I personally worry about - I'm confident the shares are going back up, even if it takes 5 years to get back to 900 - I'm confident that they will. In my investment thesis the forever roll won't work on covered calls though. If one had sold a 400 strike covered call (pre-split) at the wrong time back there, you might have rolled up to 500 or 600 (still pre-split) and today be looking at a forever roll with a 100 or 120 strike call with shares in the 600s. Any belief that the shares are coming back for that position?


The big deal though is that its not as hard as you'd think to get DITM enough that there isn't a strike improvement available while constraining yourself to a net credit. Back in Feb when IV was higher I could get $80 ITM and still roll 1 week for a strike improvement (small). Today I can't add 1 week to a $60 ITM contract and get a strike improvement (IV is lower - this is one of the consequences).

As a current for-instance: those 760 puts that I keep talking about currently have a 7/16 expiration (I roll these DITM options the week before to ensure I don't get early assignment; time value is about 0 anyway by then). The roll to 7/23 actually generates a decently large net credit but no strike improvement.

But in surprising news I could roll to 7/30 right now and get to the 755 strike and a $1 credit. This is the first 2 week roll with an available strike improvement that I've seen for months. I usually don't see a strike improvement even with a 4 week roll.

If I could have been getting $10 strike improvements, maybe 2x per month (2 week rolls instead of 1 week rolls), then it'd be a no-brainer to me. There is no doubt to me that a short put would eventually catch up.


So the size of moves we've seen since the Feb drop into the 600s - pretty easy to keep rolling and from what we've seen since, probably catch up in a month at most. A big move (short time, large share price change) and you can get caught out. And with calls possible forever (vs. say years on a short put).

This is the (or at least -a-) risk - whether the risk is worthwhile next to the reward is an individual question.

 

[CHGolferJim]

Yep - its the same on the put side. I got caught on the other side of the run up that got you.


Yes!

I don't actually have an opinion one way or the other. I do have this to add though - if I am going out beyond 3-5 weeks or so (and I mostly line in 1-2 week land), then I'm only selling a strike that I am actively ready and willing to take assignment on. In your question I would only sell the 705s or 750s if I'm ready to take assignment.

My logic is that in 6 weeks it is possible (though I personally consider it unlikely) that the shares will move a LOT. Somebody else mentioned catalysts that could have that effect. Or TSLA - that is frequently a good explanation as well. When you start with a 6 week option and then decide that you need to roll, the available rolls won't be as good when going from 6 weeks out to 8 weeks, compared to going from 1 week out to 3 weeks. You'll be giving up the ability to make changes to the position.



In theory yes. As long as you fully own the backing (no margin calls to trouble you) AND as long as you can have that backing tied up in the position for an open ended period of time (no home purchases that require pulling out the backing for instance ), then yes - you can roll ~forever.

Well - as long as the shares do come back. In the case of a sold put then that isn't something I personally worry about - I'm confident the shares are going back up, even if it takes 5 years to get back to 900 - I'm confident that they will. In my investment thesis the forever roll won't work on covered calls though. If one had sold a 400 strike covered call (pre-split) at the wrong time back there, you might have rolled up to 500 or 600 (still pre-split) and today be looking at a forever roll with a 100 or 120 strike call with shares in the 600s. Any belief that the shares are coming back for that position?


The big deal though is that its not as hard as you'd think to get DITM enough that there isn't a strike improvement available while constraining yourself to a net credit. Back in Feb when IV was higher I could get $80 ITM and still roll 1 week for a strike improvement (small). Today I can't add 1 week to a $60 ITM contract and get a strike improvement (IV is lower - this is one of the consequences).

As a current for-instance: those 760 puts that I keep talking about currently have a 7/16 expiration (I roll these DITM options the week before to ensure I don't get early assignment; time value is about 0 anyway by then). The roll to 7/23 actually generates a decently large net credit but no strike improvement.

But in surprising news I could roll to 7/30 right now and get to the 755 strike and a $1 credit. This is the first 2 week roll with an available strike improvement that I've seen for months. I usually don't see a strike improvement even with a 4 week roll.

If I could have been getting $10 strike improvements, maybe 2x per month (2 week rolls instead of 1 week rolls), then it'd be a no-brainer to me. There is no doubt to me that a short put would eventually catch up.


So the size of moves we've seen since the Feb drop into the 600s - pretty easy to keep rolling and from what we've seen since, probably catch up in a month at most. A big move (short time, large share price change) and you can get caught out. And with calls possible forever (vs. say years on a short put).

This is the (or at least -a-) risk - whether the risk is worthwhile next to the reward is an individual question.

If I sell a 6-week covered call, and can let it ride 3-4 weeks before needing to roll, won’t the available rolls be reasonably good at that point (as 2-3 weeks until expiry). Well done isolating that as an additional risk, thanks!!

 

[adiggs]

A semi-random question - is anybody using tastyworks as their brokerage / trading platform? I started looking at them due to their focus on option trading, plus their option pricing. $1 per contract on open, $0 on close, with a max of $10 per leg.

So 20 put spreads will be $10 on each of the two legs ($20 total) and $0 more to close. At Fidelity the same transaction will be .65 per contract, open and close(*). Thus $13 twice to open, and $13 twice to close, for a total of $52. As the number of contracts in a single trade increases, the premiums are better and better in favor of tastyworks.

I've done some ICs and spreads recently with >$200 premiums that would have been more like $40 - that's some real money that starts adding up.


They also claim to have the best option trading app and interface. I can readily believe that, between their focus on option trading, plus how long they've been developing and improving it.

And thus my question - anybody already using tastyworks, and have an opinion about them? Would you recommend?


I'm thinking about moving $50k over and taking them for a test drive. That should be enough for a long dated call plus a put spread, my current bread and butter trades, and see what I think.

(*) EDIT to add: I left this part out. Fidelity has a no commission close for BTC at <0.65 contract price. In this instance the comparable on the example above would be $39 instead of $52 for the round trip. I do get the benefit of this on occasion, but mostly not.

 

[adiggs]

If I sell a 6-week covered call, and can let it ride 3-4 weeks before needing to roll, won’t the available rolls be reasonably good at that point (as 2-3 weeks until expiry). Well done isolating that as an additional risk, thanks!!

Yes - they will definitely get better as the time to expiration shrinks. You might find that in 4 weeks (2 weeks to go) you will want/need to roll back out to 6 weeks.

I had a recent call with 7/9 expiration that my rule caused me to roll to 7/16 and then roll to 7/23 the next day. It's a 720 for 7/23 expiration and I'll roll again if necessary. I've grown much more aggressive about early rolls, I think mostly due to my experience this year with going DITM on both sides at different times, and how difficult it was getting those legs back close ATM. I'm slowly creeping back out of my cave


My current, constantly changing, personal rules for rolling:
1) Net credit. Violating this rule is rare and usually part of a larger trade where the other part of the larger trade is for a net credit, and the sum total is a net credit.
2) I want to be as close to expiration day as possible, but this rarely influences my decision to roll; DTE is what it is when I roll.
3) The very best rolls exist while still ITM, but are awfully good while ATM or neat OTM. So I aim to roll when the strike is within $5 of the share price, with DTE influencing whether it's $5 OTM or $5 ITM (still OTM with 1 day to go - I'll let it ride if I think it's likely to stay OTM, and let the time decay melt it down).
4) For choosing the new position:
- add 1-4 weeks, with a preference for less. But sometimes (@Lycanthrope just gave us an example) where the 2 week roll is a LOT better than the 1 week roll repeated 2 times. Sometimes the 3 or 4 week roll provides that big improvement over the 2 week roll, but its usually the 2 week roll that can improve a lot over the 1 week roll.
- improve the strike as much as possible subject to ...
- collect a large enough credit per additional week to clear my personal hurdle rate (around $3/week).
- as the position gets farther DTE then bias towards maximum strike improvement, and give up clearing the hurdle - staying OTM is too important to avoid a really big move
5) This is the tricky one - also be evaluating whether its better to just plan on assignment and let the position go to expiration.

The mindset for me, now, is that when I need to roll to avoid assignment, then the purpose of the roll is to improve the result when I take assignment. I.e. a $3 credit plus $10 strike improvement for a 1 week roll is almost certainly going to be better than taking assignment without the roll. I'm not selling weeklies worth anything close to $13 so adding a week worth $13 is a no-brainer.

And of course that also buys me time for the shares to reverse and avoid the assignment (which is why I also want to collect the ~$3/week credit at the same time; keeps my weekly income going where I'd like it to be).


I've gotten my account setup so that taking assignment on covered calls is going to be emotionally a lot easier for me. I'm not selling CC against shares any longer, only diagonal spreads using long dated LEAPs to back short dated calls. If the CC strike is high enough then letting them "assign" (meaning that I STC the long dated call and BTC the short dated call, probably on expiration day), will yield a nice profit on both sides. Then with that cash in hand, I evaluate the overall account to decide whether I buy new long dated calls to sell more CC, or keep the cash to sell puts and wait for a pullback to buy more calls / sell more CC.

I am confident that I can emotionally take assignment against a long dated call.


And the mantra / question that I keep asking myself, every time I start to make a decision about an interesting position: "this is for income". Which has so far, almost always, caused me to not do what I was thinking about doing