To The Moon

$Tesla (TSLA)$

Following earnings, institutions rolled their Tesla covered call positions higher:
Sell $TSLA 20241101 262.5 CALL$ 
Buy $TSLA 20241101 282.5 CALL$ 

Given Tesla's history of volatile moves, I conservatively sold the $250 calls last week against my stock holdings - matching the short call strike of the institutional covered call trade as a hedge. This cautious approach paid off as shares pushed through $250.

But now with stock potentially being called away, what's the best course for next week's positioning?

Based on the new $262.5/$282.5 call spread, dealers seem to be pricing a likely move to $260 for Tesla, with an outside chance towards $280 following earnings. However, we know those "low probability" upside events happen more frequently with Tesla based on past experience. Staying long could allow for further upside capture.

My strategy will be to sell $260 puts to re-establish a long position if my shares do get called away:
Sell $TSLA 20241025 260.0 PUT$ 

From a trend perspective, Tesla still appears headed higher. Doing nothing risks being without a position after potential assignment this Friday and missing the continued uptrend. Any put or call strategy is ultimately still a bullish bet, with the risk being an outsized pullback hitting doubly hard.

Compared to outright stock purchase, the put sale gives me a slightly better entry price while taking in premium. But I don't want to sell puts too far out-of-the-money and cap my upside too far.

The $260 strike matches where dealers see next week's upside stopping out. If shares pull back below $250 by Friday and I keep my current stock position, I'll look to sell it and roll into $260 puts instead - seeming like a "high" entry point, but the actual cost basis would be $260 minus put premium.

The downside is that I'll only participate in upside to $260. If Tesla rips straight to $280+, I'll have to wait for a pullback. But we're all numb to Tesla's volatile moves up and down at this point.

Institutions are certainly no strangers to this as well. In addition to the covered call roll, there were also outright bullish traders rolling up their call positions with the same $240 strike:

Buy $TSLA 20250221 240.0 CALL$  with 12,000 contracts traded

The unchanged $240 strike price from prior positions is quite telling, contrasting with a roll to higher strikes coming up for Apple.

But that's just par for the course with Tesla at this point - we know what to expect.

Speaking of those bullish call buyers, it's worth noting that if traders are sitting on massive unrealized call gains, they can look to emulate the institutional approach of rolling out winning positions to higher strikes and locking in some profits.

$Apple (AAPL)$

On that note, Apple also saw some noteworthy call rolls from institutions today:

Sell $AAPL 20241115 245.0 CALL$  with 44,000 contracts
Buy $AAPL 20250221 265.0 CALL$  with 55,000 contracts

Not much analysis needed - just a continuation of the moderately bullish uptrend priced in for Apple.

While Nvidia has undoubtedly supplanted Apple as the preeminent tech titan, this isn't due to waning innovation at Apple. It simply reflects Nvidia's leading positioning to capitalize on the AI revolution before it fully permeates consumer tech.

In fact, Apple could make an appealing put selling candidate, although its lower implied volatility results in slightly lower annualized premiums compared to the likes of Nvidia and Tesla.