Now that you've decide to roll to 2016 how do you decide it's a good time to perform the roll? Thanks in advance, I consider you the "LEAPS expert"
After trying a few different ways, I've found the best time for roll-OUT is at local highs (after a big run-up that will at best cool and at worst move down before the next climb);
The reason for this is a bit multi-fold as follows, but it's based on the assumption you want to keep your long term bull at your selected Delta tracking range (keep in mind this is a stock-replacement long hold scenario):
I maintain a net delta stock tracking of 2000-2500 shares (with short excursions from this range). The LEAPS are generally OTM by a measure that predicts where the stock will be 3-6 months before expiration (I never carry LEAPS to expiration in this scenario)
1) After a run up if you anticipate TSLA will flatten or pull back, roll out (time) and up(strike) to stay within your tracking range. Since the stock has climbed into your strike early (hence the roll-out), your current Delta tracking will be at the top of your range. Moving contracts out and up will concurrently lower your Delta but stay within your range, and will also provide a precipitation of cash to boot.
2) You may not want to roll all of them, its a process. Evaluate the length of time remaining versus the next up cycle of events to capture some of that leverage. For example J15 will still capture very key up events between now and October (Mod X, GF design, and GENIII anticipation of Jan15 reveal). However, those J16s will also be more expensive by then, so a phased approach works best
3) The move in (1) has accomplished 4 things in a single move.
a) Maintains your bull stock(Delta track) in case the pullback never materializes
b) lowers your risk (given the expected pullback the right time to do that) because drop in TSLA will translate in a lower Delta track slowing the rate of loss
c) Your new J16 position won't lose as much in time value (relative to the J15s) while you wait for the next cycle and
and 4) It provides a cash position to use if the pull back is sufficient to warrant more purchase (or if not can simply move to the side or by a ModX)
If the stock has moved into my strike soon enough (as in this case), I will couple this with both a roll-OUT and a roll-UP. I'm currently doing both (J15 $250s are joining existing J15 $300 as well as to J16 $350 and higher). The roll UP does similar as above. I'll keep the same net Delta and generate cash for the next cycle which will occur well before Oct13 imo, again concurrently reducing exposure to the pullback (Delta tracking accelerates away from the higher strike on the pullback). At the same time, when you reach end of year, those J16 will be pricey compared to now assuming the stock has moved, so I always keep both a time and strike spread- always a balance (in this case J15 and J16). I have spreadsheet that tracks the net Delta range as well as the % in J15 vs J16- currently moving that from 60%/40% to 40%/60%
Anyway- no doubt more than you wanted to hear by LEAPS n Bounds
