Discover more from Covered Calls with Reinis Fischer
Call Bear Spread on Tesla with Potential 3.9% Return in 16 days
On May 3, 2023, I sold 1 call bear spread on Tesla stock with strike prices at $190 and $195 with expiry on May 19, 2023.
For this five-dollar-wide credit spread, I was rewarded with $19.50 (after commissions).
About 3.9% potential return in 16 days, if options expire worthless.
Short delta 0.08, or about 92% probability that the trade will expire worthless.
A call bear spread is an options trading strategy that involves selling a call option with a higher strike price and simultaneously buying a call option with a lower strike price on the same underlying asset. In this case, I sold a call option with a strike price of $190 and bought a call option with a strike price of $190.
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset
here is the trade setup:
SLD 1 AMZN MAY 19 '23 190 Call Option 0.61 USD
BOT 1 AMZN MAY 19 '23 195 Call Option 0.39 USD
What happens next?
On the expiry date, May 19, 2023, TSLA is trading under $190 per share - options expire worthless and I keep premium - if TSLA trades above $190 I'm troubled as I need to deliver shares I don’t have. To avoid such scenario I will try to roll up the strike price.
The Max risk is $500 to earn $19.5
Max loss: $480.5
Break-even price: $190+$0.19= $190.19
In total: 8 trades since April 18, 2023
Options premium: $77