MM67 - Back Ratio

Today I want to talk about something I have never covered with you before: back ratios. This is just an interesting concept I have wanted to start introducing you to, a few new tools you have not heard from me yet. This is not financial advice. I am not a CPA and I am not a trading advisor.

So what is a back ratio? It pairs up nicely with everything you have been learning about Tesla, buying puts, and rolling your hedges, so let me build it from there. Say you have a Tesla position and you waited for the perfect moment to hedge it. You bought your Tesla puts. Let's use a clean example: you bought 8 Tesla November 300 puts. You pulled the trigger and said, this is it, I am in.

Then Tesla does what Tesla does. Instead of rolling over, it keeps rallying. It runs from around 330 all the way up to 370. And now you are looking at it going, I really think there is a good chance it rolls over from here. I was early before, but now I want more contracts. On top of that, you added shares along the way, so you would genuinely like a bigger hedge. There is just one problem. You do not want to pay up for it.

So here is the question I want you to sit with. How do you get more hedge, more contracts, without spending another dollar out of pocket? That is exactly what a back ratio lets you do, and I want to show you the mechanics.