MoneyTalk – The Salvage Play: How it works
Here is a summary with timeline and key points for the video transcript:
0:00:00 – Phil Davis explains his “salvage play” options technique that he developed during 2008 financial crisis
0:00:25 – What is a Salvage Play?
- Salvage play involves taking the remaining value of losing options and rolling them into new longer-term options
- Example: With a bull call spread, when market drops, long and short calls lose value. We can cash in the remaining long call value, keep the short call, and use proceeds to fund a new longer-term call spread.
0:01:54 – LoveSac Example
- Furniture company stock dropped 50% since August due to supply chain issues
- Taking remaining value of August calls and rolling into April calls with lower strikes and longer timeframe
0:03:32 – Qualcomm Example
- Cashing August calls and rolling into 2026 calls, lowering strikes
- Also selling puts to create a net credit on the roll
0:05:08 – SunPower Example
- Stock dropped on need to restate financials, but outlook still positive
- Taking January calls and rolling into 2026 calls with 3x exposure
- Also selling puts for additional income
0:07:40 – Coming Up Next
