Think of it as you basically sold a 9 strike put that expires Feb 3rd. So you are correct that if the stock tanks you’ll take a beating. Your hope is you can sell more calls to lower your basis, but if CVNA really drops there won’t be calls you can sell without the risk of a rally calling your stock away and you locking in a loss.
JackWolfbanger t1_j6lxiec wrote
Reply to 2nd time making a covered call: 1600 shares of Carvana at $8.43. 16 $9 calls sold at 0.71 a call by thisisthetaa
Long Stock + Short Call = Short Put
Think of it as you basically sold a 9 strike put that expires Feb 3rd. So you are correct that if the stock tanks you’ll take a beating. Your hope is you can sell more calls to lower your basis, but if CVNA really drops there won’t be calls you can sell without the risk of a rally calling your stock away and you locking in a loss.