Tackle Today: The Roadhouse Trading Blues 🎶 | Tackle Trading

≈ All night long. ≈

The Covered Call strategy is considered a safe play because it is a covered trade.

What that means is if the short call is in-the-money at expiration you will have to sell your shares. No problem, you have the ammo to do so. Imagine those who don’t. Short calls can destroy your account but if you are covered—i.e. not naked—, you are not committing any sin.

That doesn’t mean this strategy does not have its moments.

“Keep your eyes on the road,
Your hands upon the wheel.”

The stock you are selling calls against can go up, sideways or down. It is the downward movement that can get you in trouble.

“Keep your eyes on the road,
Your hands upon the wheel.”

Say you’ve entered a Covered Call position on an ETF that is trading at $43 and sold the 30 DTE $43.5 calls for $0.70.

“Yeah, we’re goin’ to the Roadhouse”

Mr. Trump wakes up determined to shake the hell out of the bluebird. He tweets. The ETF you are holding is highly sensitive to temper tantrums. It falls.

“We’re gonna have a real
Good time.”

You are now making money on the call but losing on the stock. What are you going to do?

“Let it roll, baby, roll.”

How far should you roll the calls and keep losing on the stock?

“Let it roll, baby, roll.”

Now you are selling calls at a strike below your BEP. How to proceed?

“Let it roll, baby, roll.”

Attend tonight’s Cash Flow Club with Coach Mark because this is exactly what he is going to talk about.

“Let it roll, all night long.
Do it, Mark, do it.”

Chart of the Day: Let it roll, baby, roll.

How far should you keep this trade on, rolling the calls down and out? Attend tonight’s Cash Flow Club to learn how to properly manage this type of situation.

Video of the day: What is a Covered Call

A covered call is a combination strategy in which the trader buys stock in increments of +100 shares and then sells -1 call option contract for each 100 shares of stock.

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Originally published at https://tackletrading.com on August 8, 2019.