Hey everyone, I’m trying to figure out if this will work as im thinking or will it fail over something not foreseen. I understand options fully, but I don’t do anything other than selling calls and puts at this point.
Here’s my thought:
Buy a covered call a year out or so. It could probably be 6-8 months too. Buy a .3 to .35 delta. Then sell a weekly covered call with a .25 delta or so. If the stock price hits the covered call strike price, sell the call and buyback the covered call to just break even and rinse and repeat and gain stock appreciation. If the price drops, you simply sell covered calls until you’ve paid back the price of the far out call you bought. Once that call is paid for, it’s a free call and rinse and repeat.
Aside from the stock plummeting for a year and crushing the call, what could go wrong?
Far out calls to protect weekly covered calls for TSLA
byu/Common____Sense inoptions
Posted by Common____Sense
5 Comments
That’s called a PMCC. Look it up
You’re mis describing a PMCC. You can’t sell a covered call if the underlying strike isn’t lower. What you’re describing is a delta that is with an OTM leap.
What do you mean by “Buy a covered call”?
You’re just adding more long delta to the position, the call you are buying is not covered
if tsla goes down you lose more money , if tsla goes past your short dated covered calls, the uncovered part of your position is still profiting
your position will behave very closely to 200 shares of tsla with 100 shares covered via 1 call, and 100 shares from a long dated fairly close to ATM call. Since it’s an option it will be leveraged (controlling 100 shares for less than the cost of 100 shares, with the risk of it expiring worthless)
Your question is a bit confusing because you mention selling two covered calls on the same underlying with different durations. How would that work? Are you putting up two separate sets of shares?
For the longer-dated covered call, you’d need one block of shares. For the shorter weekly calls, you’d need another. A covered call always means selling calls against shares you already own. If you don’t actually own the shares for both, then what you’re describing is closer to a diagonal spread (often called a “poor man’s covered call”).
If you can clarify exactly what you mean, I can break it down further.
Also, [Option Buddy](https://optionbuddy.ai/) is building tools to help visualize these setups so traders can clearly see the risks and mechanics before and after entering a trade.