Date Entered: February 3, 2026
Status: Position Open (2 Contracts)

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Trade Thesis (Why This Exists)

This is a Poor Man’s Covered Call (PMCC) structured as a diagonal spread designed to:

1. Capture earnings-inflated implied volatility via the short call
2. Maintain long-term bullish exposure via a deep ITM LEAPS
3. Use active management to avoid assignment and gamma choke
4. Generate repeatable income while preserving upside optionality

ROKU reports Q4 earnings on February 12, 2026 (after the bell). This setup intentionally sells volatility into that event while maintaining a defined-risk bullish position.

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📋 Trade Summary (Actual Entries)

Long Leg (LEAPS):

• 2× Jan 15, 2027 $60 Call @ $42.85

Short Leg (Income):

• 2× March 6, 2026 $110 Call @ $2.93

Net Debit:

• $39.92 per spread
• $7,984 total capital deployed

Break-Even (at entry):

• $99.92

Stock Price at Entry:

• ~$96.18

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Why the $110 Short Call Was Chosen

• The $110 strike sits outside the expected earnings move
• Premium is artificially inflated by earnings volatility
• Strike selection balances:
  • Rent collection
  • Gamma risk
  • Roll flexibility

This is not a “set and forget” strike—it is intentionally close enough to monetize IV, but far enough to manage.

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📜 The Golden Rules (Non-Negotiable)

1. Never let the short call expire ITM
   • If ROKU is above $110 near expiration, close or roll.
   • Do not risk waking up short 200 shares.
2. Monitor Extrinsic Value, Not P/L
   • If extrinsic value falls below ~$0.20 near expiration, assignment risk rises sharply.
   • Early assignment is rare, but avoidable.
3. Ignore Individual Leg P/L
   • A rising stock will show a “losing” short call.
   • Always evaluate net liquidation value of the full position.

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📈 Profit & Risk Framework

Important: A PMCC diagonal does not have a fixed max profit.
Profit is path-dependent and realized through management.

Outcome Scenarios at March Expiration

Scenario	ROKU Price	Result
Strong Rally	$115–$125	LEAPS appreciates strongly; short call likely rolled for credit
Ideal Outcome	<$110	Short call expires worthless; keep full premium
Flat / Modest Up	$96–$105	Income cycle completed; sell next call
Earnings Miss	<$85	LEAPS loses value; shift to repair & income mode

Cycle Income Potential:

• $293 per contract per cycle
• Repeatable if managed correctly

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⚡ Why This Works for ROKU Right Now

1. The Earnings Volatility Edge

• Short call IV collapses faster than LEAPS IV after earnings
• This creates a volatility shield rather than exposure

2. High Rent-to-Strike Yield

• $2.93 on a $110 strike (~2.6% in 31 days)
• Elevated due to ROKU’s high beta (~1.98)

3. Technical Awareness

• Prior resistance near $115–$117 (52-week highs)
• $110 allows defensive management before that zone

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🛠 Post-Earnings Management Plan (Mechanical, Not Emotional)

Earnings Date: Feb 12, 2026 (After the Bell)
Execution Rule: Wait until at least 10:00 AM ET on Feb 13 to allow IV and bid/ask spreads to normalize.

ROKU Post-Earnings Decision Matrix

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🛡 LEAPS Repair & Capital Preservation Protocol

1. Aggressive Roll-Down (Primary Repair)

• Sell $60 LEAPS
• Buy $50 or $55 LEAPS
• Restores delta and lowers effective breakeven

2. Income Compression Strategy

• Sell nearer-dated calls closer to ATM
• Accept capped upside temporarily to rebuild capital

⚠️ Advanced Only: Ratio Repair (Optional)

• Converts trade into undefined-risk structure
• Not default behavior
• Use only with margin awareness and experience

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🚦 When to Cut and Walk Away

The 50% Capital Rule

• If net position value falls below ~$19.96 per spread
• Close and preserve remaining capital

Fundamental Breakdown

• Structural business change ≠ bad quarter
• Do not repair broken narratives

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🔍 Greeks: What Actually Matters

Vega (Volatility)

• LEAPS benefits pre-earnings
• Short call collapses faster post-earnings

Theta (Time)

• Short call offsets LEAPS decay
• Net theta trends toward neutral

Delta (Directional Bias)

• Long: ~0.85
• Short: ~0.26

Net Delta:

• ~+1.18 (equivalent to ~118 shares)

⚠️ Delta is stable only while price remains well below the short strike. Gamma dominates near $105–$110.

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⚠️ The Gamma Spike Warning

If ROKU trades above $105 post-earnings, short call delta can rapidly accelerate.

Rule:

• Do not “wait and hope” near the strike
• Close or roll early to protect upside

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🎯 Feb 13 Earnings Decision Matrix (Quick Reference)

Metric	Safe	Danger
Short Delta	< 0.35	> 0.50
Extrinsic	> $0.50	< $0.20
Net Theta	Near 0	Deeply negative

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📜 Final Rule for Earnings Morning

Wait until 10:00 AM ET.
Post-earnings price discovery is chaotic early. Trade against real prices, not panic spreads.

STRESS TESTS

POSITION SNAPSHOT (Baseline)

Underlying: ROKU ≈ 91
Long: Jan 2027 60 call (deep ITM, high delta)
Short: Mar 6 110 call
Net posture: Long stock-like exposure + short theta

Think of this as:

You own synthetic stock at ~60 and are renting it out above 110.

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🧪 STRESS TEST 1 — FAST REBOUND (Most People Panic Here)

Scenario

• ROKU rips: 91 → 105–108 quickly
• IV expands
• Short call wakes up

What happens mechanically

• LEAP delta explodes upward (good)
• Short call delta rises (manageable)
• Net position still strongly positive

Your rules

Trigger	Action
Short delta < 0.30	Do nothing
Short delta ≈ 0.30–0.35	Prep roll
ROKU > ~108	Roll up & out

Correct adjustment

• Roll 110 → 115 or 120
• Move to April
• Take flat or small credit

✅ You keep upside
✅ You don’t choke the LEAP
✅ Trade stays asymmetric

Important:
You do not roll the long. Ever. This is exactly what the LEAP is for.

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🧪 STRESS TEST 2 — SLOW GRIND LOWER (Silent Killer)

Scenario

• ROKU drifts: 91 → 85–88
• No drama, no IV spike
• Feels “dead”

What happens

• LEAP bleeds delta slowly
• Short decays beautifully
• PMCC works exactly as designed

Your rules

• Let Mar 6 expire or close ≥60%
• Re-sell next month ~0.20 delta
• Do not chase credit lower

Outcome after 2–3 cycles:

• Shorts fund most of the LEAP drawdown
• Position stabilizes
• No structural damage

This is the highest probability path.

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🧪 STRESS TEST 3 — HARD BREAKDOWN (The One That Matters)

Scenario

• ROKU drops fast: 91 → 70–75
• IV spikes
• Headlines turn ugly

What happens

• LEAP loses intrinsic (still ITM)
• Shorts become very easy income
• Delta still >0.75 — structure intact

Your rules

Condition	Action
LEAP delta > 0.70	Hold
IV elevated	Sell higher IV shorts
Panic urge	Ignore it

Optional defensive upgrade:

• Sell slightly closer strikes (still ≥0.25 delta max)
• Use fear to pay yourself

🚫 You still do not roll the long
🚫 You still do not “reset” cost basis

You only reassess if:

• ROKU < ~65 and
• Long delta collapses

That’s a very different trade.

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🔒 FAILURE CONDITIONS (Know These)

This PMCC only breaks if:

• Stock collapses below the LEAP strike and stays there
• Or time falls below ~9 months with no recovery

You are nowhere near either.

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📌 Net Result Across All Scenarios

Scenario	Outcome
Fast rebound	LEAP wins big, short managed
Chop / drift	Shorts quietly compound
Selloff	Structure survives, income improves

That’s why PMCCs are powerful when you don’t touch them.