MM69 - Synthetic Longs that are Underwater

Hi everyone. I asked the community what you are struggling with the most and what you would like to see in a Market Minute, and this question came up more than any other. I also see it over and over in the Q&A sessions. So today I want to go through synthetic longs on Tesla that are far out of the money, the kind you might be holding for December 2027. This is not financial advice. I am not a CPA and I am not a trading advisor.

Let me set the scene. Pretend you built a synthetic long: you sold the 400 put and you bought the 420 call. You are long that 420 call and short the 400 put, and right now it is underwater. The question I keep getting is simple. Why would I roll this thing out to December 2028?

Here is the honest answer. A lot is going to happen to Tesla between December 2027 and December 2028. If you are dead set on exercising that 420 call no matter what, and you already have the cash set aside to do it in December 2027, then you can absolutely just wait. I am not telling you that you have to roll. But rolling is where you genuinely improve your position, and I want to show you how.

Before I do, one honest aside. When Tesla was down at 290, I was posting in Rapid Fire over and over that I was rolling any out of the money long Tesla calls I had down for 25 to 30 cents on the dollar. There were multiple chances to do it. I am not crying over spilled milk here. I am showing you so that if you are newer and you missed it, you will recognize the setup next time, because a chance like that can come right back around in two weeks. So what are your actual choices when your synthetic long is stranded far out of the money?