The Trade at a Glance
- Underlying Stock: Tesla Inc. ($TSLA)
- Strategy: Roll 1 Cash-Secured Put
- Expiration: March 21
- Strike Price: $287.5
- Premium Received: $200 (additional credit from the roll)
- Margin Requirement: $28,750 (secured cash for 100 shares)
Key Metrics
- Max Profit: $200 (collected upfront)
- Break-Even Price: Adjusted based on previous premium collected
- Risk: Obligation to buy 100 shares of $TSLA at $287.5 if assigned
Why This Trade Makes Sense
Income Generation
Rolling the put allows for additional premium collection, improving potential returns while maintaining trade flexibility.
Stock Acquisition at a Discount
If assigned, you buy $TSLA at an effective lower price, considering all collected premiums.
Capital Efficiency
A $100K account can strategically roll puts to enhance income generation while preserving liquidity for other trades.
Risk Management
- Max Loss Scenario: If $TSLA drops to zero, the potential loss is $28,750 minus total premiums received.
- Mitigation Strategies:
- Monitor price action and consider rolling again if it makes sense to further extend duration and collect additional credit.
- Only trade if you’re comfortable owning $TSLA long-term at $287.5.
Why $TSLA?
Tesla remains a high-growth stock with volatility, making it attractive for premium collection through options strategies. Selling and rolling puts on such stocks provides a balance of income generation and potential stock ownership at a strategic price.
Final Thoughts
Rolling cash-secured puts is a proven method for increasing income while managing risk. This $TSLA trade allows for additional premium collection, keeping the portfolio actively engaged in market movements.
Stay Updated!
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Disclaimer: This post is for educational purposes only. Past performance isn’t indicative of future results. Options trading carries significant risk.
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