Depends on your options level and cash. You need to have enough cash or margin to buy back the first leg without the premium from the second. Or be able to sell an additional option while holding the original in your account.
My IRA doesn't allow margin but I'm able to roll options that I otherwise wouldn't be able to if done in two separate orders.
Indeed a real "roll" is as complex buy-to-sell order, but both legs happen at the same time, the benefit being that the strike can't get away from you in the time it takes to sell, then set the buy order, and also means you don't need cash or margin to close out the existing position - which separate buy and sell orders do need. In fact as I reinvest all my premiums in shares for the moment, I would have to sell som shares in order to rebuy a position that was getting uncomfortable, so I tend not to bother.
Yes, of course. I realize this thread has become a bit of a catch-all, but in general its main purpose is discussion around selling options against TSLA shares that are not meant as B&H. As such, account balance is the really the only thing that matters in context of that methodology.
B&H is a different scenario for sure, but the general point is still the same: If one is selling covered calls on B&H TSLA shares with a fixed/static strategy, one is going to be disappointed long term. Sure, with downward TSLA movement its a non-issue as the loss on the underlying is just part of long term ownership and the gain on the -C's simply softens the blow. On the upside however, maintaining a fixed strategy is going to result in materially significant gains left on the table and--as was the case for CC sellers in 2020--unavoidable dumping of otherwise B&H shares because their CC's were so underwater.
Its important for us to all accept that the above two concepts*** can exist at the same time for a trader; one does not necessarily preclude the other. Some amount of capital can be dedicated to B&H shares and some amount of capital can be dedicated to selling options. Someone who's in growth mode would want to be more conservative with CC's on their B&H shares, in an effort to realize inevitable gains from big moves. Someone who's met their financial goals might be more agressive with CC's on their B&H shares, accepting the possibility of having them called away (with or without an immediate re-buy).
***For those who wish to trade smartly and safely, one would also have capital dedicated to buying options.
As always, great advice and well-articulated. Thanks to all. My situation bolded above. This week’s recent trades highlight these points. Not wanting to lose my shares (and still years from being able to access my IRAs), I sold -c802.50s 4/1 for $4.40 and -c755s 3/25 for $4.00 during the Monday AM peak. After reviewing Max Pain over the weekend, I felt that these calls would be safe at my risk tolerance, but I still kept about 2x cash available for a buyback (just in case). Tuesday, after the SP dropped (
and during what appeared to be just a minute after a local minimum), I bought them back for $1.12 & $0.72, respectively. I then quickly sold -c702.50s 3/25 for $6.62 during the following small SP rise. Again, I felt that these strikes would be safe at my risk tolerance, after the Mon/Tues SP drop. Furthermore, with the extra premiums adding to my cash cache, I felt comfortable putting in buy orders in $10 increments, eventually getting 15 shares for $632.69 to $666.75.
Since it takes me a few minutes to get the individual trades completed, and sometimes things get messed up and I must restart the process, I attempt to buy on down trends and sell on up trends. I don’t always get the best prices, but it’s the best I can do without margin, an official roll option, and being required to put in limit orders instead of market orders. As one would expect, this week has been very good for my newbie options trading, but terrible for my overall account balance. Certainly, more premium could have been obtained by trading closer to the SP, but I’m very happy with my results and should generate over $10k this week.
. It seems strange to me.
