How David Jaffee Handles a Bad Trade

This video is about how David Jaffe handles a trade gone bad; which would be Tesla.  He actually entered this trade on the 30th of June, somewhere in here, and you can see that on Friday, July 10th, only 10 days later, the Tesla stock is up over 50% in just 10 days.  So how did he handle this?  

So first of all he had Plan A where he got in here closer to the open and he sold the position out as you can see for a $1.09.  So he sold a call, a 1480 call.  So he saw the call way up in here 1480 right at this level but he sold it back here for a $1.00.  So he was planning on just taking that $1.00 maybe taking 50% of it but he was just planning on selling that call and Plan A was just to take profits from it.  

But then he had to turn to Plan B.  So you can see he turned to Plan B on the seventh so and that is here.  Right here.  So Tesla had ran up all the way to here, started it here, he went to plan B here after Tesla was up 35%.  And Plan B, as you can see was, he actually bought back the 1480 call that he had sold and he exchanged it for 1520 call.  So he was right in here, 1480 right up here.  He sold this call and then he exchanged it for a call up a little higher.  So he increases his probability a little bit.  But then also, he knows that that took a debit, that cost money to do it.  So he sold this 1200 put.  Sold 1200 way down in here, lets see.  

So he sold a put at this range the 1200.  And the reason why he did that was this Plan B was to bring in a credit.  Overall, this trade brought in another $0.32 cents.  So you can see and as he got closer to expiration, so he put in this trade what on the seventh, and then the tenth came around and he went to plan C.  What was Plan C? 

So you can see Plan C occurred right at the end of the day.  He wanted to make sure all the extrinsic value was out of that 1520 call that he sold.  So there was hardly any extrinsic value.   And he turned around, he did a diagonal, so he bought this 1520 call to close out.  And then he sold an 1830 call.  So he went way up into here at this–this level and sold a call.  So he basically exchanged the call around here and and made it more higher probability sold it for up here.  And because this call has another week to go, this new one that he sold, it doesn’t expire for another week as opposed to the one that expired today.  He was able to exchange those two for another $0.72 credit. 

So you can see here how he had added up credit every time.  So Plan A brought in credit, Plan B brought in credit, Plan C brought in credit, and he’s a lot safer.  He’s got a pretty high probability situation all the way up here at 1830 and he has one week to go.  So it’s very interesting on how he trades when he gets into trouble.  I mean that’s the key thing you want to see what does he do when he gets into trouble, and what he’s done so far is actually pretty good.  From what I’ve seen, I mean, if you see a stock move up 50% in ten days after your short a call they’re going to be in a lot of trouble.  But he’s able to mitigate that risk and run pretty well with it.


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