Discover more from Covered Calls with Reinis Fischer
Closed TSLA call options with a loss, established put options on NIO, buying AMZN
On June 8, 2023, after TSLA stock rallied close to $250 per share I decided to close a 255/300 call back spread on this stock. Unfortunately with a loss. Our total loss since we started selling options with TSLA back in April equals -604 USD.
As one of our main goals is to grow our portfolio to 100 Amazon stocks I decided to invest the same amount from the losing trade with TSLA into buying additional 5 AMZN shares. Now holding 30 with average buy price 109.10
To mitigate the loss taken from the TSLA trade I come up with a plan selling puts on NIO stock. Trading NIO is not something new for me, I have been selling puts and calls with great success on it a lot back in 2020. Time will only show can I repeat my success. My goal is to recover at least the money I’ve lost with TSLA trade
here is the trade setup:
SLD 2 NIO JUN 16 '23 7.5 Put Option 0.18 USD
What happens next?
On the expiry date, June 16, 2023, NIO is trading above $7.5 per share - options expire worthlessly and I keep premium - if NIO trades under $7.5 on the expiry date, I risk getting assigned 200 shares, and will have to buy them paying $1,500
But as I already have collected a premium of $0.18 per share, my break-even price for this trade is $7.5-$0.18 = $7.32
In case of an assignment, I will turn this trade into a wheel strategy and will start selling covered calls.
Anyhow, if troubled with the strike price near the expiry, I will try to roll it forward and down, preferably for credit, before actually taking the stock assignment.
In total: 2 trades since June 8, 2023
Options premium: $66
In recovery (from TSLA trade): -$538