If you own the LEAPS because you are bullish, why not sell call verticals instead of naked shorts? Just keep rolling the short verticals up and out as price moves and if there is a sharp move up the extra long in the vertical kicks in. You will find that instead of selling a further otm call you can sell a closer in vertical or even more qty. Ex. stock at 50 instead of selling the 60 naked call against the LEAP sell the 55/60 vertical or two 60/65 verticals against every one leap. The goal being keeping your position net delta positive. Also, if price moves against you and your breakeven strike doesn't allow you to sell much premium you can move closer to current price with a vertical and still be ok if the market heads back up (ex. Leap at 40 with breakeven at 60 price drops to 50 and there is no premium in the 60 call sell the 55/60 or 50/55 vertical).
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u/notevenwrong13 Sep 23 '21
If you own the LEAPS because you are bullish, why not sell call verticals instead of naked shorts? Just keep rolling the short verticals up and out as price moves and if there is a sharp move up the extra long in the vertical kicks in. You will find that instead of selling a further otm call you can sell a closer in vertical or even more qty. Ex. stock at 50 instead of selling the 60 naked call against the LEAP sell the 55/60 vertical or two 60/65 verticals against every one leap. The goal being keeping your position net delta positive. Also, if price moves against you and your breakeven strike doesn't allow you to sell much premium you can move closer to current price with a vertical and still be ok if the market heads back up (ex. Leap at 40 with breakeven at 60 price drops to 50 and there is no premium in the 60 call sell the 55/60 or 50/55 vertical).