How I’m Preserving My Account While Playing Defense: A Tesla and MicroStrategy Strategy Breakdown
Market volatility is inevitable, but how you respond can make a big difference in protecting your investments. Today, I’ll walk you through my defensive strategies for two positions currently down: Tesla and MicroStrategy.
Let’s dive in!
Reacting to Market Moves: Defending My Tesla Position
At market open, both Tesla and MicroStrategy are showing signs of weakness. My focus is on preserving profits and managing risks without making hasty decisions. Tesla is one of the stocks I hold, and I’m already in a position where I've sold 435 and 425 strike calls.
Rolling Down Tesla’s Calls
The Tesla 435 calls I sold for $6.98 are now up to around $8.70, meaning there's some juice left. The stock price has dropped to $422.38, but my strike is at 435. Given that we’re now deep in the red, it’s time to roll the position.
I’m going to sell the 410 calls and buy back the 435 calls, thereby rolling down my strike price. The key here is to sell deep in-the-money options to protect my account. The 410 calls still have about $8.7 in premium, which helps offset some of the losses.
I’m accepting a bit of a trade-off. While I give up some juice with this move, I’m also positioning myself to handle further downside risk better, potentially mitigating more losses if Tesla drops further.
The Adjustments I Made
After rolling, I now have 15 contracts of 425 calls (still out-of-the-money), and I've swapped into 4 contracts of 410 calls (deep in-the-money, with about $15 of intrinsic value). The premium I received for the 410 calls is $26.90 per share, with $12.74 being pure extrinsic value (or “juice”).
So far, this move has provided me with a better depth, reducing my exposure to Tesla’s downside while collecting decent premium.
MicroStrategy: Playing Defense with Less Risk
Next, let’s take a look at MicroStrategy. I’m holding calls on the 330 strike, which were originally sold against my 175 calls. MicroStrategy’s stock price has dipped from its highs, and the calls I sold are now trading at half of their initial value.
Rolling Down MicroStrategy Calls
With three days left in the week, I’m making the decision to roll these calls down, taking advantage of the remaining time value. Right now, the stock price is at $317, so I’m rolling from the 330 calls to the 315s for the January 10th expiration.
Here’s the interesting part: The 315 calls have a premium of $19, which is a bit more juice than the 330s, which were around $12.10.
This adjustment gives me more premium while still keeping my position intact. I’m also leaving one contract open as an asymmetric trade in case the stock bounces back.
Final Adjustments and Outcome
After rolling down the MicroStrategy position, I now have seven contracts of 315 calls against eight contracts of 175 calls. The total premium I’m collecting for the next week is approximately $144,000.
Strategy Recap: Why Defense Matters
When stocks start to dip, it's tempting to take drastic actions. However, playing defense—making small adjustments to your positions rather than abandoning them—can help you ride out volatility while still earning some premium.
Rolling down strikes, capturing remaining premium, and avoiding over-trading are essential strategies to minimize losses in challenging times. As you can see, I’ve adjusted both Tesla and MicroStrategy positions, preserving capital and managing risk without jumping the gun.
Life-Improving Tips
Whether you're new to the world of trading or an experienced investor, making small, consistent improvements to your daily routine can have a profound impact on your overall success. Here are some tips that can help you get the most out of your trading journey and in life:
- Develop a Strong Morning Routine
Start your day with a routine that sets you up for success. Whether it’s a quick workout, journaling, or reviewing your trading plan, a productive morning routine helps you stay focused and energized for the day ahead.
- Stay Educated and Continuously Learn
The markets are always evolving, and staying informed is key to making intelligent decisions. Take time each week to read books, watch educational videos, or join trading communities to sharpen your skills.
- Practice Patience and Discipline
Patience is one of the most valuable traits in trading and in life. Resist the urge to act impulsively and instead, take the time to make well-informed decisions. Discipline allows you to stick to your strategy and avoid unnecessary risk.
- Use Defensive Strategies to Protect Your Capital
As I mentioned in the blog, defense is just as important as offense. Learn how to protect your account with smart strategies like rolling down your options or diversifying your portfolio. This reduces risks and helps you weather market volatility.
- Take Breaks and Avoid Overtrading
Trading can be intense, and it's important to take breaks to maintain mental clarity. Stepping away from your screen helps you avoid emotional trading, which can often lead to poor decisions.
- Track Your Progress
Regularly review your trades and assess what worked and what didn’t. By tracking your progress, you can identify areas for improvement and refine your strategies.
- Mind Your Health and Wellbeing
Trading can be mentally exhausting, so it’s important to balance your work with self-care. Exercise, eat well, and prioritize sleep to ensure you're at your best when making trading decisions.
FAQ
- Why roll down options instead of closing them?
Rolling down allows you to maintain your position while adjusting to a new market reality. It helps capture more premium and preserves your account value, as opposed to closing positions prematurely.
- What does “juice” mean in options trading?
"Juice" refers to the extrinsic value of an options contract, or the amount of premium over and above the intrinsic value. It’s what you earn when you sell options, and rolling allows you to either keep or add more juice to your positions.
- When should I roll down my options?
You should roll down when your stock position has declined significantly, and you want to adjust your strike prices while still collecting premium. It helps mitigate losses if the stock continues to move against you.
- What’s the risk of rolling options?
Rolling options can be risky if the stock moves sharply in the opposite direction, as it could lead to larger losses. However, when done correctly, it allows you to adapt to market conditions and potentially profit from volatility.
- Should beginners attempt rolling strategies?
Rolling options is an advanced strategy. Beginners should first understand the fundamentals of options trading before diving into rolling strategies. It's essential to practice risk management and ensure you fully comprehend the mechanics of options.
Call to Action
Now that you have some actionable tips to improve your trading—and your life—it’s time to put them into practice. Start by creating your morning routine or rolling down your options like I discussed. The sooner you implement these strategies, the sooner you’ll start seeing results!
Conclusion
Defensive trading isn't about being passive—it's about being strategic in adjusting your positions as the market fluctuates. Whether you’re rolling down strikes on Tesla or MicroStrategy, these adjustments ensure you're still in control while generating consistent premium income.
