After reading about covered calls last weekend and learning a lot from the replies I got here on twitter it’s time to put them to the test. As announced I’ll use $NKLA for this trade – a boutique car rendering company you may already have heard about

Needless to say this is not the proper use of covered calls – a trade which is typically “mildly bullish” – but the thing is: stocks like $NKLA are often notoriously hard to nail with put options, so I want to see if a YOLO version of covered calls might be an alternative.

So let’s see how it goes and whether it’s possible to turn this underdog of the booming EV industry in a true dividend champion.
To start I just bought 100 shares of $NKLA at $31.71 and sold a $34 call option expiring next week (hence the YOLO version) for $3.2

The dream is that my call expires worthless or that I’ll find an opportunity to close it at a much lower price, after which I’ll obviously sell a new call. The risk is that the stock price might collapse, but that wouldn’t necessarily mean that I can’t continue selling new calls.

If the stock would make a nice rebound I’ll have to decide whether to buy back the call option at a higher price or face the risk of seeing the trade come to an end.
So let’s give it a try and see how it goes.
All feedback and criticism is more than welcome.

On a sidenote: I’ve done a lot of YOLO option trading this year and have managed to book slightly incredible results with it, which I put down to a lot of luck but also to a certain level of discipline.
Only to say that I would never pay $3.2 for a $34 $NKLA call today.

In the end that’s what the trade I’m trying here is all about and that's why I picked this volatile stock. Again, I know it's not how covered calls are typically used but there's no harm in trying something new. And as a bonus I'm now contributing to the advent of sustai - nvm

Little update on my experiment in which I earlier today closed my previous call for $0.35 and sold a $33 for next week for $2.25. Not the best timing but all in all I'm happy so far with my cost basis now down to $27 and the shares trading at $33.

Small update after Trevor abandoned my $NKLA yolo cc trade. The $33 call I sold Friday, briefly traded for .15 at the open which I should have used to buy it back. Lesson learnt: always have an order in place - just in case.
Apart from that we just keep rolling along for now

Don't know if twitter shows what I'm still adding here, but if it might be inspirational to fellow apprentice traders I'll keep updating this experiment. Just did what I should've done yesterday - closed the previous call for .25 and sold a new $27 for this week for 2.00

What I'm trying to test here is whether selling covered calls might be an alternative to buying puts and $NKLA has proven to be an excellent choice in that regard
Cost basis now down to $25.3 per share but call with $27 strike still open, which might be too ambitious obviously

Just bought my call back for .45 bringing my cost basis of my shares to 25.80, which now for the first time is above where they are trading. Gonna take a break to see what the stonk will do and how to take it further.

With the hangover it had NKLA shouldn't have made my selection obviously, but on the other hand, test is to see whether and how covered calls can be traded on stonks so this extreme situation might be useful as a test.
Irony is that I fear recovery now

One more small update as I've just done what I maybe should 've done from the start: added a Nov $20 put as insurance. Came at a high cost of $5.6 so the race is on to earn that back with dividends.

And in the last minute I sold a new $23 call for next week for $2.1.
All activity combined until now brings the cost basis for my shares to $29.3.
With further downside protected by the put, I'll have to make $9 on selling calls in the coming weeks to break even on the trade.

Which ironically will be easiest when the share price keeps dropping. Still getting used to the dynamics, but it feels like it would become dangerous when shares start recovering.
Lesson learnt: with risk like we had here with $NKLA I should have added a put option from the start

Just bought the last call back for $1.35.
Gonna update later with some lessons learnt and how I plan to take this further.
Well aware that I will be sounding very much like Elon Musk - touting things I discovered which are in fact already well known to experienced traders

Pressure on $NKLA is taking its toll with fewer gamblers paying for weekly calls. For my experiment I want to make $1.30 per week to pay for my insurance (writing off the cost of my put option in 9 weeks) and keep a decent yield after that. Had to sell $19 call to get $1.35

Looks like it will be time to kiss my $NKLA shares goodbye tomorrow as I sold a $19 call and I'm not prepared to pay $5 for the right to keep this stonk. Won't be the end of the experiment though because the regained volatility should be a gift for what I'm trying to achieve

One special thing I noticed about selling covered calls is that the trade offers a special perspective on a stock for which a lot of the noise is totally irrelevant. Which helps to recognize the noise for what it most often really is

For those interested I'll just keep updating the results of the yolo covered calls experiment, with yolo referring to the weekly options I'm selling. My $NKLA shares got called away at $19 last Friday which means I took a $13 loss per share since I bought them 3 weeks earlier

In those 3 weeks I did make $8 a share selling call options though, so that brings the loss to $5 a share. Still too much and I probably shouldn't have picked NKLA for this experiment. The put I bought as an insurance when it got really scary is at an additional $1 loss.

So I'm now at the other side of the wheel and I sold a put option today for $0.95 with strike $22 in order to get my shares back. The yolo style of the trade did ask for a higher strike and premium, but I wanna get some fresh breath first. Fingers crossed that $GM doesn't ruin it

Outstanding order to buy back my put at 0.05 - have learnt that it's a key element of this trade - got filled at the open today which is a gift because the market doesn't seem impressed at the moment with $NKLA's research on fueling H2 trucks. Maybe they'd stick to renderings.

Also bought a Jan $15 put this week which is to replace the Nov $20 put I have as insurance. Have yet to sell the Nov put so total position is a bit messed up at the moment. Plan is to sell a fresh put on Monday and then update where I stand.

Been giving it a lot of consideration and I've decided to remove the protective long term puts from my yolo wheel with weekly options. First because the basis of my trade has been to test whether selling weekly covered calls on a stonk could be a valid alternative to buying puts.

In that regard it doesn't make sense to add a put to the trade with selling options. Second reason is that I don't really know how to value the ownership of the puts. What's an insurance worth as long as your house doesn't burn down? But third and most important reason is that...

... my biggest risk when trading the wheel (selling puts until
I get to buy stock, then sell calls until my stock gets sold) is that I get stuck in a yo-yo where I keep buying high and selling low, which is something the long term put doesn't offer protection for.

So I've decided to rewrite history and I've removed the long term puts from the trade (I'll keep 'm to see if they do better than the wheel). With the cleaned slate, I've lost $13 a share while I owned the stock and made $9 back via selling options.

So on to a fresh week in $NKLA world, where I'm seeing some support at the current level and I'm ready to own the stock again so I can make more money selling calls than I do now selling puts.
All to say that I sold a $24 weekly put around the open today for $1.15

My target is to make 0.65 per week, which is 2% of the price I initially paid for the NKLA shares. But I obviously need some extra to start covering for the severe loss when Trevor was thrown off the ship. At this rate all that could be forgotten by the time the lock-up expires

Almost ready to conclude that the yolo wheel isn't the best trading system when one's very bearish on a stonk, but for the sake of the experiment I just paid $3.70 to close my $24 NKLA put and sold a new $20 put expiring today for $0.45

With my put in the money, I became the proud owner of 100 NKLA shares again over the weekend. Looking back, rolling down my put on Friday came down to paying $3.25 per share to save $4 on the purchase, so that may have been a good move (finding it all out on the go, to be honest)

Overall this wheel system hasn't been very successful as I'm down $7 a share since I started the trade on the 11th of September. Or put differently: the cost basis of my shares is now $27 a share. Volatility is my enemy, and it doesn't look like it's going away soon.

On the other hand - volatility creates opportunity and the challenge of this trade is to embrace it. So let's wait a few hours to see if we get some action - and a better price for selling a new call option than the price on offer now.

Okay, just sold a $20 for 1,55 which seems the best I can get for now, and maybe isn't too bad after all. If my shares get called away at the end of the week, I'll have bought and sold at $20 with the 1,55 covering the costs. If we go lower, 7% for a week is a nice dividend.

With $NKLA up more than 10% last week after dropping more than 10% the week before I get kicked around a bit too much in my yolo wheel but last week hasn't been too bad after all. The shares which I bought only a week earlier got called away at $20 over the weekend.

The good news is that buying and selling the shares at $20 cost me only 44 cents in commission while selling the put in between brought in $1.52. With that the overall loss on my trade has been reduced to $5.26 per share.

One lesson learnt is that I should have more respect for the true meaning of selling options, which is being prepared to buy or sell at the given strike price.
Most articles about this trade advice to sell options at the price you want to earn or at a given delta (.30 to .40)

The risk though is in the share price dropping faster than what the options earn, which becomes a problem when buying back at higher prices than what I'm selling for. So I'm going to focus more on what I want to buy or sell for.

To put that in practice I have an order in now to sell a new $20 put, but so far nobody's willing to pay .40
To be continued...

And we're back in. One of the things to look forward to now is earnings on the 9th of Nov. If management fails to restore some confidence then things could turn really nasty when the lockup expires

17% drop in NKLA last week, so my $20 put got executed and I'm now owning 100 shares again. Sold a $20 call for .50 with an order to buy it back for .10
Would be nice to have volatility work for me in this trade for a change

Time for another update as my order to buy back my call for .10 got filled earlier today. So I'm just holding my 100 shares for a change with my cost basis now at 24.76, which means I'm slowly recovering from earlier losses.
Gonna take a break now until after earnings

Time to start wrapping this trade up and after having walked the walk for two months and after a review of all actions here and in a few separate paper trades, I'm pretty confident in stating that the wheel as a trading strategy simply does not work.

The wheel is a system advocated by the so-called
#ThetaGang in which one keeps selling puts and covered calls in order to keep harvesting time value. While nice in theory, there's one big problem: in doing so the wheeler is always on the wrong side of the trade.

When a stock goes up and down, like stocks tend to do, the wheeler, by nature of the trade, owns the stock when it's going down. That in itself isn't too bad as selling time value can very often compensate for the decline in stock price.

In fact, I've come to accept that selling covered calls can be a nice alternative to buying puts when one is bearish without a clear trigger for a collapse. I've come to appreciate covered calls and I'll definitely keep experimenting with them.

The problem with the wheel is that when one just flips to selling puts when getting kicked out of a covered call, and vice versa, one ends up buying high and selling low.

It's exactly what I've seen in this $nkla trade where it's not the strong decline in share price since I started but paying too much for re-entries that has caused most of my $5.5 per share loss which I'm at now.

So selling covered calls is fine, but when the shares get called away, I'll just wait for a next re-entry point and then simply buy the shares instead of selling puts. Making the trade finite also helps to better manage the covered calls - another important factor

So I'm giving up the wheel (although I'd love to hear more arguments for it but even the dedicated group on reddit doesn't seem to have them).
Final stage for this experiment where I'm at the moment owning 100 shares and waiting for earnings after which I'll sell a new call

No idea what to expect. Management better has something prepared to give the market some confidence. We'll see.

Having listened to the conference call, my best guess is that the $NKLA $GM deal will go through, in the sense that NKLA will give GM 10% of the company or so, but that development of the Badger will be put on hold.

Prospects obv. don't look good and market pressure isn't helping much. I've set my sight on exiting and true to the test here, I'll do so via covered calls.
Sold $18 call for .90 earlier today, so we'll see how it goes

Felt an urge to further mess with this trade. As my call because of the rise in stock price had only 10 cents of time value left, I bought it back for 3.20. Have a new order now to sell a $21 weekly for .85, which so far didn't work because the stock suddenly dropped. To be cont.

Big move in $NKLA today so time for an update on my weekly covered call experiment. Which is back to a true covered call experiment as I have thrown the wheel out of the window, as explained earlier in the thread.

Last week I decided to pay up to buy back my call option and keep my shares as momentum was going steady. Messed up rolling over which cost me a dollar per share, so I ended up selling a $23 call for this week without actually reducing my overal loss which is at $5.30 per share

If current stock price holds until the end of the week I'd have to hick up another $3 to keep the shares. Guess my decision will depend on the price I can get for selling a new call.

Update to my $NKLA trade where I've decided to keep rolling. Just paid $3.1 to close my call option which had just a few cents in extrinsic value left. Plan is to just sit on the shares now until further news on the $GM deal which should come next week or the week after that.

Okay, one more lesson learnt: when selling covered calls, remember to take a break now and then

Time to wrap this up and what better way than via selling a call option. Went for $35 for next week, which I got 2 dollars for. I'll keep rolling if needed but will also happily sell if stock gets called away
(Separately bought some calls earlier for a gamble on good $GM news)

With most greeks killed on my $35 call (), I bought it back for 10 cents and sold a new $24 call for 1,15.

Quick update as I bought back the 24 call for .15 yesterday. Collapse has obviously been brutal for my covered call experiment as I went from a complete recovery to an on paper profit last week to a $10 per share loss now.
Will try to sell a new call today which could be tricky