SpaceX Covered Calls: How Mark Yegge Is Rolling for Income While Managing Downside Risk

SpaceX has been moving sharply, but Mark Yegge says his objective is not to predict whether the stock is headed dramatically higher or lower. His focus is different: structure the position for income, maintain downside protection, and manage the short calls as conditions change.

After initially using deep in-the-money covered calls to create a substantial cushion, Mark says the trade has recovered to around breakeven-plus territory. With the stock moving higher again, the challenge has shifted from defending the downside to deciding how aggressively to roll the calls upward without creating what he calls the whipsaw.

Key Takeaways

How the Deep In-the-Money Strategy Helped During the Decline

Mark says his SpaceX position began at a relatively high entry level, but he paired the position with deep in-the-money short calls. At one point, he describes using the 170 strike and creating roughly a $50 cushion.

That cushion became important when the stock subsequently dropped by roughly the same amount. As SpaceX moved lower, Mark continued rolling the calls and says the protection eventually extended down toward approximately the 115 area.

His explanation is that the decline in the underlying or long option position was substantially offset by changes in the short in-the-money calls. Now that SpaceX has recovered, he says the overall trade has moved back into approximately breakeven-plus territory.

The Four Cornerstones Still Matter

Mark uses the SpaceX trade as an example of why a system matters even when the original setup is not perfect. He describes four cornerstones behind the Cash Flow Machine approach:

In this case, Mark says the broader market had been more yellow-to-red and acknowledges that his original chart entry was not ideal. His argument is that a predefined system gave him tools to manage the position rather than relying on a prediction about whether SpaceX would continue higher or collapse.

What the SpaceX Chart Is Telling Mark Now

After bottoming around the 105 area in Mark’s analysis, SpaceX began showing renewed strength. He highlights four advancing sessions out of five following earnings, with several occurring on stronger volume.

During the session discussed in the video, Mark notes that the stock had climbed back toward the upper 140s and was reaching prices not seen for several weeks.

From his technical perspective, that matters because the stock had moved through an area where sellers previously appeared. He interprets the move as evidence that buyers had regained control in the short term.

He also points to improving moving-average relationships and a nearby support level that had recently held. Together, those signals lead him to describe SpaceX as being in a small uptrend at the time of the analysis.

Why Mark Decided to Roll the 130 Calls

Mark had previously rolled his short calls up to the 130 strike. With SpaceX trading roughly in the upper 140s, those calls had moved substantially in the money.

When he originally sold them, Mark says the position contained approximately $5.80 per share of extrinsic value, or “juice.” By the time of this update, very little of that extrinsic premium remained.

Rather than wait another couple of days to capture a relatively small remaining amount, he decided to roll the calls and reset the income opportunity.

The Biggest Risk on the Way Up: The Whipsaw

A sharply rising stock creates a different management problem. Mark calls it the whipsaw.

Suppose the stock rallies and the trader immediately rolls the covered call all the way up near the current market price. That move reduces the amount of in-the-money downside protection. If the stock then reverses sharply, the trader may have sacrificed much of the cushion that was previously protecting the position.

Mark therefore does not want to chase every rally with an equally aggressive roll. His preference in this example is to move the strike upward while still leaving the short call meaningfully in the money.

Understanding the Base Position, Short Call, and Delta

Mark emphasizes that an in-the-money covered call appearing to lose money as the stock rises does not necessarily mean the combined position is losing at the same rate.

If the stock itself rises, the short call generally moves against the seller, but the underlying base position also appreciates. If the base position is a deep in-the-money long call or LEAP rather than shares, the relationship is similar but affected by the option’s delta.

Mark gives the example of a long option with a 0.90 delta. If the stock rises $10, that option might gain roughly $9 while a deeply in-the-money short call could move against the position by closer to $10. He accepts that difference as part of the income strategy rather than expecting perfect one-for-one movement.

Why Mark Chose the 138 Strike

With SpaceX near the upper 140s, Mark considered where to move the short calls next. Rolling all the way toward an at-the-money strike could have generated more premium, but it would also have reduced his downside cushion substantially.

Instead, he chose to roll from the 130 calls to the 138 strike. According to his discussion, the roll produced approximately $11.20 per share of total credit, with roughly $3.50 per share representing new extrinsic value or “juice.”

The remainder of the in-the-money amount continued to function as a cushion. That combination—new income plus meaningful downside protection—is the balance Mark was looking for.

Why SpaceX Is Attracting So Much Attention

Beyond the options mechanics, Mark believes investor perception of SpaceX is changing. In his view, the story is no longer centered exclusively on rockets.

He points to growing attention around AI, including Grok and broader AI-related developments, as a reason investors may increasingly view the company through a technology and artificial-intelligence lens.

According to Mark’s interpretation, that changing narrative is contributing to renewed excitement around the stock and may be one factor behind the recent sharp price movement.

The Lockup Overhang Has Not Produced the Selling Some Expected

Mark also discusses concerns surrounding shares becoming eligible for sale. Some investors had expected those unlocks to create significant downward pressure.

His observation is that the first period discussed in the video did not result in the broad selling pressure many traders feared. Instead, the stock moved higher.

Mark cautions that additional eligible shares could still become an issue. However, he believes the market had already been aware that these events were coming, meaning at least some of the concern may have been reflected in expectations beforehand.

For an option seller, the uncertainty has another consequence: volatility. Mark notes that elevated uncertainty can help support richer option premiums, creating more potential “juice” for covered call sellers.

Starlink, AI, and Volatility: Three Parts of the SpaceX Story

Mark describes SpaceX as effectively containing several different stories inside one company.

Mark also expects individual rocket-related headlines to remain unpredictable. Rather than focusing on every isolated launch event, he believes the larger Starlink operating trends may ultimately matter more to the long-term story.

What Covered Call Traders Should Watch

The Bottom Line

Mark Yegge is not approaching SpaceX as a simple directional bet. He openly says he does not know whether the stock will eventually trade dramatically higher or dramatically lower.

That uncertainty is precisely why he is using covered calls. His objective is to collect option income while using in-the-money strikes to create a cushion against downside movement.

As the stock rebounds, the management problem changes. Instead of defending a falling position, Mark now has to decide how far to roll the strike upward without giving away too much protection and exposing the trade to a whipsaw.

His larger lesson is consistent with the Cash Flow Machine philosophy: choose the stock, evaluate the market and chart, structure the position around risk, and then focus on repeatedly collecting the juice rather than trying to predict every move the stock will make.