The stock market decided to take a dive at about 10:10 am this morning. The S&P dropped 1.0% over the next 40 minutes. DIA dropped 0.8%. And what I really care about was TSLA falling from the market open at $843.15 all the way down to $800.02. TSLA spent the rest of the day teetering between 805-815 and closing at 805.
The earnings report on TSLA was weeks ago. There was no clear reason for the general market drop, nor TSLA. Some argue that the market as a whole is over inflated and TSLA is over inflated. But the truth is, people have been saying that for years and years.
So why do I care about this dip if I’m bullish on both the market and on TSLA?
Well, I happen to have a large options position expiring 2/12. I had sold 5 credit spreads with strikes of 795/775 I took in 400 credit on Monday with a probability of profit of . But by 3pm today – I was in the hole by $1,700.
To me it didn’t make sense why this position got so bad so fast with no explanation of this drop.
I remain bullish on TSLA but with 2 days until expiration, I wanted out of my current position. I also didn’t want to take a loss. A huge loss by the looks of it.
This was the first time I tried to roll my position, both out and down. From 2/12 expiration, I rolled out to next week 2/19. I rolled down from 795/775 down to 785/765 to give the stock some additional breathing room.
To close my current position, I had to pay $2,100 and subtracting my $400 credit, I was down $1,700 to close my trade.
However, because I rolled, a new position was created giving me additional premium of $2,775. That’s a net max profit on this total trade of $1,075.
If TSLA stays where it is all through next week, I may keep rolling out because I’m convinced it will bounce up. I just don’t know when.
So when you’re in an unfavorable position, sometimes there are viable solutions to turn your loss into a win. What’s important is to be vigilant and do your due diligence. Have a plan and stick to it. Adapt when it hits the fan.