Covered Calls Rollercoaster

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Covered Calls Rollercoaster

If you aren’t a Tesla or an Apple shareholder, then the last few months of your portfolio have probably been in the green.

Much like Oklahoma City Thunder fans or really any fandoms that aren’t Lakers or Warriors ☹️ 

(Check on the Elon Fanboys in your life btw… they’ve been on a fr rollercoaster)

So, you're chugging along with your portfolio nice and peacefully, enjoying the steady uptrend of the market.

But then, out of nowhere, the market takes a week-long sabbatical to Australia (down under). (get it? ha.ha.)

So… What do?

Premium Pop = Roll Opportunity

When the market has been on an uptrend and suddenly hits a down week, the value of your sold call options might go up.

This can be great news if you are getting close to an assignment risk situation and the market price is getting close to your strike price. With the market correcting, your premium will seek safety and potentially be ready to roll.

I’ve talked about rolling before, but a situation with the market as we’ve had over the last 10 days is the perfect time to roll a position and collect ideally a majority of the premium before the position expires.

Example:

If you have a contract that’s gained 80% or more over time, then you can roll the position and collect essentially 80% (or whatever amount of the premium) by opening another contract and collecting the net credit of the two transactions. You then avoid losing more value of the contract which is a concept called ~theta decay~

We can talk more about that later.

When it comes to trading Covered Calls, or any options strategy, there is always risk.

So do your research and buckle up… there’s been some increased volatility and we’re all just along for the ride.

Weekly Tidbits

• Haters gon’ hate and regulators gon’ regulate: Even more Anti-monopoly regulation is continuing to be a threat to big players trying to get bigger. The FTC is making things difficult for industries beyond Tech… to fashion.

• Goodbye To Tok City: The House and Biden The House passed legislation that has the potential to ban TikTok in the United States if made law. TikTok is attempting to bring together its 170M US users to push back against this. 

• We’re So Back: The most distant man-made object ever originated from Earth, Voyager 1, finally regained consciousness. It is finally sending readable data after months of gibberish.

Meme of the Week

Credit @ParikPatelCFA