IMHO, This is maturity.
With short to mid term options you need to act like a trader, rather than like a HODL investor, in other words err on the side of taking the profit sooner, rather than waiting longer.
That said, the point of opportunity cost applies to all kinds of investments.
I am curious if you have any thoughts on selling Dec, Jan ~600 calls as protection for downturn in the next 3-6 weeks?
To the first point, that buy and hold mentality has served me extraordinarily well for the TSLA shares I've accumulated over the years. And has failed me spectacularly on the few calls I've purchased (leading me to stop trying to leverage up results using call purchases
).
For some reason, the mentality for selling options does work for me. I think because at the limit, I can "sell and hold" and at the end of the option, I will have earned all of the premium (whether I'm also assigned or not, the premium is all mine).
That idea of opportunity cost, risk, and reward applying to all investments - so very very true. One reason for the bias towards early close is that it also ends the possibility (in that position) of something suddenly going very, very wrong (a risk that is always present, even if the odds shrink towards zero, they never reach zero until the position is closed).
For your direction question, that's approximately the covered call position I am currently contemplating. I like the 600ish strike as that will be ~$100 beyond the ATH, so I like that gap the distant strike provides. For me, I think of covered calls as "pre-selling" shares at a desirable price point, with the outcome being that I collect a premium now for the privilege of pre-selling my shares, and the downside of collecting a premium and keeping my shares if/when we finish OTM.
Which is sort of like protection for a downturn - it's at least income / earnings that you can collect along the way while you wait for the share price to recover.
I have been planning to open a position today or tomorrow along those lines. I was also expecting the stock to be trading up today and tomorrow in anticipation of earnings - with the moves down the last couple of days, I might wait another few days.
Anyways, now I'm almost ready to become active and I wanted to thank @adiggs for opening this thread and everyone else who contributes here regularly for their posts and insights. I hope I can return something of value in the near future.
Always learning....
Welcome aboard
@FS_FRA . I like your ending observation - always learning. Good luck in your adventures, and I hope you'll share with us what you learn along the way. That's always been my purpose in this thread - learn what I can from people with more knowledge and experience.
And I think that means contributing back as well, to whatever degree that I can. At least if I wander into a hole, y'all will likely know how I got there so you can maybe avoid it yourself!