I found you last night and I have a question on this trade. You're Buying an $80 Call Leap June 21, 2024 and selling an 80 Call Feb 10, 2023. I fully understand the concept but what I'm not clear on is the 80 strike. With AMZN well over $80 sitting at about $89 now how do you prevent this from being Called away ? THANKS!
Excellent question which I didn't fully answer in the video. The reason I do this is it gives you a hedge to the downside. Earnings is on 2/2/23, however, because there is no dividend on $AMZN, the risk of assignment as long as you roll before 21 days-to-Expiration should be low. On this trade, I have every intention of rolling up a strike (or two) to follow the stock up, assuming it goes up. My goal is to get the short strike around the 70 delta call strike and follow that number.
This always includes some downside protection while benefiting from positive theta and perhaps the long call increasing in value over the course of the trade.
If you are assigned, simply sell a covered call at a higher strike out close to 29 days or 45 days (depending if you plan to roll weekly or monthly), and it will neutralize the assignment and put you back on track.
The paid subscription is new, but I plan to offer trading rules; trades; and some other tools. There is not a lot of content on the paid site, yet.
I plan to go through trades when they come up on both the public and paid side. I may add some additional information and/or adjustments for the trade on the paid side.
I plan to answer questions as they come up for anyone. Learning is mutually beneficial!
Updated to show the 1st month roll. I wanted to add the February 17 strikes did not allow for dollar-wide spreads, so I rolled out monthly.
Hi Chris,
I found you last night and I have a question on this trade. You're Buying an $80 Call Leap June 21, 2024 and selling an 80 Call Feb 10, 2023. I fully understand the concept but what I'm not clear on is the 80 strike. With AMZN well over $80 sitting at about $89 now how do you prevent this from being Called away ? THANKS!
Excellent question which I didn't fully answer in the video. The reason I do this is it gives you a hedge to the downside. Earnings is on 2/2/23, however, because there is no dividend on $AMZN, the risk of assignment as long as you roll before 21 days-to-Expiration should be low. On this trade, I have every intention of rolling up a strike (or two) to follow the stock up, assuming it goes up. My goal is to get the short strike around the 70 delta call strike and follow that number.
This always includes some downside protection while benefiting from positive theta and perhaps the long call increasing in value over the course of the trade.
If you are assigned, simply sell a covered call at a higher strike out close to 29 days or 45 days (depending if you plan to roll weekly or monthly), and it will neutralize the assignment and put you back on track.
Chris, Thank You for the Follow up!
Do you provide detailed information (trade by trade) for this trade and all of your trades for members to follow and learn ?
The paid subscription is new, but I plan to offer trading rules; trades; and some other tools. There is not a lot of content on the paid site, yet.
I plan to go through trades when they come up on both the public and paid side. I may add some additional information and/or adjustments for the trade on the paid side.
I plan to answer questions as they come up for anyone. Learning is mutually beneficial!