MM13 - Selling Calls on ALAB: How I Bring in Income While I Wait

Let me walk you through a trade I'm looking at right now — selling a call on Astera Labs (ALAB). This is a great example of reading the chart, identifying your levels, and making a plan before you ever place the trade.

First, the chart. This is the 4-hour IADSS chart. We had major resistance at the $190 level and support at $140. The stock tested $140 here, here, here, and here — and then finally broke through. Once it broke down, that old support at $140 became new resistance. That's the rule: when something bounces off a level and then breaks through, it tests that level from the other side.

Right now, ALAB is testing that $140 resistance from below. Yesterday it failed. Today it's still struggling. I don't have a crystal ball, but I do see a lot of overhead resistance — and if $140 doesn't hold, the next resistance level is the 200 moving average around $150.

So what could I do here to bring in income?

Let's say my original entry was a put I sold that got assigned, and I own the stock at a cost basis of $125. Right now I can sell a call against it.

Do I have my ideal positive +2 mean reversion yet? No. But what I do have is defined overhead resistance at $140 and more resistance at $150. If I'm okay getting called away at $140, I can sell a call now and bring in income to lower my cost basis.

Here's what I looked at in thinkorswim:

First, I checked the monthlies — they always have the most open interest and tightest spreads. The April $140 call was trading between $6.15 and $6.45. That's a nice tight spread, and for 30 days it's about a 5% ROI. Not bad.

Then I asked: how much more could I get if I went one week further? About $2.50 more. I liked that better. The tradeoff? Lower open interest and a wider bid-ask spread. The fix: when you see a wide spread, don't hit the lowest bid. Place your order at the midpoint and be patient, you can always lower your price if you don’t get filled.  

The trade on the whiteboard:

• Current Stock price: $128

• Selling: April 24th $140 call

• Credit: ~$8.50 (maybe $9.00 on the open with volatility)

• Breakeven: $148.50 (strike price + credit)

How do I make money? Three ways. I make money if the stock goes up to $140 ($148.50 with the credit). I make money if the stock goes sideways. And I even make money if the stock dips a little — because I keep the credit either way. I stop making additional money at the short call strike plus my credit: $148.50.

My new buffer: My original entry was $125. Minus the $8.50 credit, my effective cost basis drops to $116.50. That's a nice cost basis reduction.  

My personal rule: I only sell one option for every 100 shares I own. And if it's a stock I'm holding for long-term growth, I only sell calls against 10–20% of my position. So on 1,000 shares? I'm selling 1 or 2 calls.

And here's the key — I already know my next move.

I think about trading like poker. When I make a bet, I'm not just betting on this hand — I know what my next few hands will look like based on this bet.

If ALAB gets called away at $140, that means we're probably back in the old trading range. I'll start selling puts again, get myself assigned, and repeat the wheel. I can see my next sell points at $180 and $188 for future calls. I can see where I'd sell puts if we rally and pull back to these levels.

That's what a plan looks like. And in the next Market Minutes, I'll show you the difference between a workhorse like ALAB and a racehorse — and why I treat them very differently.