10 Minute Read

Tales of a Technician: Harvesting Gains on Harley

April 27, 2016

By | 8 Comments

Tales of a Technician: Harvesting Gains on Harley

You’ve planted your seeds, toiled for months, and now your efforts are finally bearing fruit. The large, ripe, green kind. We’re talking greenbacks. Not Washingtons. Not even Jacksons. No, your months of effort have yielded Benjamins and they’re coming out your ears.

It’s harvest time, baby.

During a recent mentorship session (one brimming with enlightenment) we analyzed a calendar spread my client held on none other than Harley Davidson. The Hogster. The Hoggie-Hog. Rather than buying shares of HOG and selling covered calls, he purchased a long-term, in-the-money call option and was selling short-term call options against it for income generation. Let’s say he’s long the November 30 strike call currently worth $19.20.

Due to Harley’s relentless ride higher in recent months, his long call has moved deep in-the-money accumulating all sorts of intrinsic value in the process. On the one hand, he wants to continue selling covered calls against the November option to score some more income. On the other hand, the November option, now deep ITM, is bursting with Benjamins just waiting to be harvested.

‘Tis a dilemma I tell ye, a dilemma.

Here was my suggestion, one that applies anytime your long call has moved deep ITM and you want to maintain your exposure while capturing some of the gains: roll up.

Now, diligent readers of Tales of a Technician. Intelligent, wisdom-seekers that they are might recall we discussed the ol’ roll up recently. That particular missive spoke to rolling up short calls. Today we turn to the long call roll-up.

Currently, the November 30 call boasts $19.20 of value and carries a 100 delta. It is for all intents and purposes a perfect proxy for long stock. But, with a number of higher strike prices carrying a much lower price tag, but similar delta, it’s altogether unnecessary to own a call this deep ITM for the purpose of selling covered calls against it.

My suggestion was to sell the Nov 30 call thereby harvesting the $19.20 and replace it with a long Nov 37.50 call for $12.00. The adjustment allows you to remove $7.20 per share ($720 per contract) of value from the position. That means you have $7.20 less capital tied up in the trade. That means you have $7.20 less risk. And, since the Nov 37.50 call has a delta around 90 it will behave very similar to the Nov 30 call allowing you to continue shorting calls against it for the months ahead.

It’s a win-win.

The transaction for rolling up is to sell to close the Nov 30 call while buying to open the Nov 37.50. The roll will yield a net credit of $7.20.

That, my friends, is how a pro-farmer harvests.


Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

The Tales of a Technician series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

Sign up now for a 15-DAY FREE TRIAL #


Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involve a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax, and accounting advisers, to determine whether such trading or investment is appropriate for that user.

8 Replies to “Tales of a Technician: Harvesting Gains on Harley”

  1. Thomas Hammonds says:

    Thanks Ty! I really enjoy your Tails of a Technician articles!!

  2. JoanNee says:

    Makes total sense! Thanks.

  3. ERICSIMMS says:

    Great analysis, many thanks, Ty.

  4. KEITHGIUNTA says:

    Thanks Tyler. It’s beginning to make sense.

  5. Nicholas Kingsbury says:

    Thank you.

  6. JOHNRYAN says:

    Thanks Tyler! Great info.! Very beneficial!

  7. Great lesson Tyler. You will notice I roll up my long calls and puts quite often in the options report. Always looking for a profit lock. Also this is great for people who trade 1 or 2 contracts and want to take profit and stay in the trade.

  8. CYNTHIABLACKWELL says:

    Lovin’ it!

Comments are closed.

Chart Modal

Tackle Trading

Book a FREE Consultation

Sign up for a free consultation to build your Educational Plan.