Wiki Selling TSLA Options - Be the House

[Criscmt]

Wait. Definitely not today. I’m also targeting 860s but waiting until at least Tuesday, probably Wednesday, before I decide. At least you are protected by the 800 & 850 call wall, but still the premium will likely rise Monday.

With the IV being so low right now, what is the upside to selling those today, as opposed to waiting until Mon/Tue?

The concern is about share price dropping on Monday during market hours and it dragging premiums lower than what IV can effect.
Happened the ER day in Q1 too, and even then everyone's expectation were positive. Of course, this time we have a beat in P&D, but that might be baked in into the expectation.

Anyhow, I am having second thoughts.

 

[Yoona]

For Apr 23:

Sold IC +p670/-p675/-c800/+p805 (same as last week, why not)
Sold CC -c760 (i may regret this)
Sold Short Strangle -p690/-c800 (first time trying SS, because more profitable than the CC and IC)

4 wins today (deja vu of last week)

Sold IC +p670/-p675/-c800/+p805 (same as last week, why not)
- the credit 0.83 is too small, so i opened 300 contracts to make up (coz son keeps harassing me daily to buy him a red MY; of course secretly i already decided yes)
- i made the puts low to reduce the risk of 125k max loss

Sold CC -c760 (i may regret this)
- not anymore; THANK YOU, Mr. Biden
- but just to be safe, 3:30pm BTC @0.02

Sold Short Strangle -p690/-c800 (first time trying SS, because more profitable than the CC and IC)
- first try is a success; double credits are really yummy
- 3:45pm BTC @0.01

Daytrading TSLA stock - Friday afternoon
- the SP up/down/up/down was too tempting; 5 quick buy/sell flips

 

[ReddyLeaf]

4 wins today (deja vu of last week)

Sold IC +p670/-p675/-c800/+p805 (same as last week, why not)
- the credit 0.83 is too small, so i opened 300 contracts to make up (coz son keeps harassing me daily to buy him a red MY; of course secretly i already decided yes)
- i made the puts low to reduce the risk of 125k max loss

Sold CC -c760 (i may regret this)
- not anymore; THANK YOU, Mr. Biden
- but just to be safe, 3:30pm BTC @0.02

Sold Short Strangle -p690/-c800 (first time trying SS, because more profitable than the CC and IC)
- first try is a success; double credits are really yummy
- 3:45pm BTC @0.01

Daytrading TSLA stock - Friday afternoon
- the SP up/down/up/down was too tempting; 5 quick buy/sell flips

I would hate to do your taxes.

 

[Runarbt]

It's the positive expectation from almost everyone on price action, both Monday morning and post ER, that's concerning me. Would like to hedge by selling a fraction of calls today. And it's IRA account.

Sure, we are positive.

Elsewhere - mostly FUD, selling, etc.

 

[blckdmp]

Wondering if anyone has experience/insight into the actual mechanics of early assignment? Do you get notification that the options have been assigned as they are exercised in real time (ie: by the time you first hear of it, you've already had the shares bought/sold for you)? Or is there a warning that it's coming and the assignment clears later? Also if you're running sold spreads, does your broker liquidate the bought options immediately to cover the sold ones behind the scenes to cover the assignment? Or do they try to buy/sell the exercised shares using cash and margin before exercising your "cover" options? Any insights would be appreciated. Trying to make sure I don't leave myself open for nasty surprises.

 

[buttershrimp]

Wondering if anyone has experience/insight into the actual mechanics of early assignment? Do you get notification that the options have been assigned as they are exercised in real time (ie: by the time you first hear of it, you've already had the shares bought/sold for you)? Or is there a warning that it's coming and the assignment clears later? Also if you're running sold spreads, does your broker liquidate the bought options immediately to cover the sold ones behind the scenes to cover the assignment? Or do they try to buy/sell the exercised shares using cash and margin before exercising your "cover" options? Any insights would be appreciated. Trying to make sure I don't leave myself open for nasty surprises.

Hi all I have some DITM puts that expire today with schwab. SP was 4xcp750 and costs basis was 720 so it seems that I’ve “made” about $2800 if they are assigned. Is there any reason to think they may not be assigned? I figured it was a guaranteed assignment since it’s not close to 750. Just glad to have not made a bad move since it was first week using the wheel!

 

[bxr140]

Wondering if anyone has experience/insight into the actual mechanics of early assignment? Do you get notification that the options have been assigned as they are exercised in real time (ie: by the time you first hear of it, you've already had the shares bought/sold for you)? Or is there a warning that it's coming and the assignment clears later? Also if you're running sold spreads, does your broker liquidate the bought options immediately to cover the sold ones behind the scenes to cover the assignment? Or do they try to buy/sell the exercised shares using cash and margin before exercising your "cover" options? Any insights would be appreciated. Trying to make sure I don't leave myself open for nasty surprises.

Its always happened to me after hours, so I find out about it when I wake up and check my accounts.

Obviously with a covered call its kind of a non-issue (unless you were foolish enough to sell covered calls on margin), and basically the same with a cash covered put. You just end up with money where you used to have shares or shares where you used to have money, with a total account balance equivalent to whatever it was just before your sold options were executed (+/- any subsequent market action).

Having a margined contract executed (so, naked or credit spread) your broker won't immediately liquidate to cover anything (at least that's never happened to me) but you may be put in the penalty box where you can only do closing tractions. Depending on how deep you are into margin determines (near as my experience has shown) how quickly the margin department will close your positions to cover your outstanding margin balance and how long they will keep you in the penalty box. In most of my cases I've squared my *sugar* as soon as I see I pulled the short straw, but a few times I've let it ride for a few hours (price action was in my favor) and once or twice I've actually had the margin department liquidate on my behalf. Smaller margin calls can come due on the order of days, which gives you the option of dumping more capital into the account instead of closing positions. (Note that the times I've had margin calls due at the end of the week have all been the result of good old fashioned shitty portfolio management, not because I had sold calls executed)

Anyway, IMHO its very worth it to solve the margin problem on your own, as you have more <ahem> options. If you need to close positions, for instance, it doesn't have to be the 'leftover' legs from the execution, like the +C's you may be holding after a spread had its -C's executed. You can just close whatever you want as long as the sum of those positions that get you back in your margin department's good graces.

The good news is that you are in complete control of your financial screwdom. You will only ever get screwed as much as you allow yourself to get screwed. It can get emotional for sure, because if we're in that situation in the first place (a margin call) our account balance is already getting kicked in the grill, but...that's the result of not properly managing our positions in the first place.

 

[adiggs]

Sure, we are positive.

Elsewhere - mostly FUD, selling, etc.

I've got a similar view of things regarding the expected reaction to this earnings report (too much positive here). I realize I'm not replying to the right message to agree

To be very specific - I do expect an earnings result that I consider to be very positive. The question I'm pondering is whether the broad investing universe expects such good results that it draws significant new owners / buyers into the market. That is what is needed for the shares to go up - not a bunch of us that believe in the long term future of the company, sitting around looking at each other, and most importantly - not buying significant numbers of new shares (I won't be buying regardless - I have enough shares).


A higher share price arises from enough buying to exceed selling AND to keep it going as the share price goes up. And I don't see this earnings report as doing anything more than continuing to lay the ground work for significant new buying sometime in the future (with a reasonably good chance, IMHO, for later in the year).

A different way of thinking about this - I DO see the likely positives from this earnings report as already priced into the share price. My primary rationale is that in pre-split $, the shares are around $3600 right now. Less than 1 year ago (say last August) when the shares were in the $1400-$1700 range, a share price of $3600 was mind blowingly high. Even to me with a long term (by 2030) expectation of $4000-$10,000 ($20k - $50k pre-split). I just don't see a big move towards that longer term expectation this year, and if we were to finish this year at <$1000 or even not hitting another ATH along the way I won't be surprised about that at all.

Interestingly to me - due to MM ability to manufacture new shares out of thin air, there is always an unlimited number of new shares for the MM to create. And that leads to the ability to push the price down anytime; there is no equivalent dynamic on the buy side. E.g. - we don't need net new sellers for the share price to go down (relative to the issued shares). A generally sideways trading environment can readily turn into something like that 5 year trading channel we've seen before as the shorts are able to manufacture the shares needed to control the share price.

I suspect that the additional lever (manufacture new shares out of thin air) also means that everything else being equal, people that want to take a directional bet and are willing to manipulate the news and share price, do so on the short side. Regardless of their belief in the long term business - the incremental tool is too powerful to work against.


The significant new source of buying that I can see is two-fold:
1) City NOA in widespread distribution in the current fleet, leading to line of sight to full autonomy and the robo-taxi business that many are so excited about. That is a step change in possibilities for the business.
2) Ongoing improvements in profitability, leading to a steadily decreasing P/E ratio. With a consequence that the investors in the world that DO focus on the financials will finally start seeing the possibilities and gain the confidence to invest in the financial story - not just the climate / renewable energy economy / technology advantage / etc.. story.

CT, semi, Roadster, increasing build rate at existing factories, and any other new / upgraded versions of vehicles - I see all of these in the (2) bucket.

I don't know when (1) will happen - I sort of think that widespread City NOA is a this-year thing (i.e. line of sight), but full autonomy that is available widely is definitely not a this year thing, and might not be a next 5 years thing (I do expect full autonomy in a limited subset of cities that are aggressive about attracting that sort of business through friendly regulation).

I think that (2) is an ongoing progression. Similar to Apple and the iPhone - at some point in the initial ramp, Apple was suddenly generating such large amounts of free cash and then GAAP profits that there just wasn't enough places to spend it all. I see that coming for Tesla, but probably not this year.

 

[blckdmp]

Having a margined contract executed (so, naked or credit spread) your broker won't immediately liquidate to cover anything (at least that's never happened to me) but you may be put in the penalty box where you can only do closing tractions. Depending on how deep you are into margin determines (near as my experience has shown) how quickly the margin department will close your positions to cover your outstanding margin balance and how long they will keep you in the penalty box. In most of my cases I've squared my *sugar* as soon as I see I pulled the short straw, but a few times I've let it ride for a few hours (price action was in my favor) and once or twice I've actually had the margin department liquidate on my behalf. Smaller margin calls can come due on the order of days, which gives you the option of dumping more capital into the account instead of closing positions. (Note that the times I've had margin calls due at the end of the week have all been the result of good old fashioned shitty portfolio management, not because I had sold calls executed)

Thx! Good info as always. I'm going to bug you with a few more questions if you have the patience. Firstly, in a multiple contract position, are you likely to be assigned on all your sold contracts, or is the unlikely event of being early assigned even more unlikely to affect more than one contract? I'm specifically thinking of calendar spreads. With them it's easy enough to buy many contracts with effectively no margin requirements. Obviously you always have the "cover" of the bought options to protect you, but I'm interested (concerned) with the money mechanics.

As a hypothetical example, let's say I got crazy and opened a 100 contract TLSA calendar spread. Sold 100 720c and bought 100 720c that expire a week later. Margin and cash-wise, opening that trade is affordable enough; but if (somehow) all 100 contracts were assigned early, suddenly I'm on the hook to buy $7.2 million worth of stock. I can't imagine that the brokerage would be cool with that, and would presumably start liquidating things. Would they sell off portfolio/margin first and only then move into covering the damage with the open calls, or would they see the "logic" in the spread and just use the bought 720c to cover the transaction? Or does that scenario just never happen in the real world? TIA

 

[Criscmt]

The concern is about share price dropping on Monday during market hours and it dragging premiums lower than what IV can effect.
Happened the ER day in Q1 too, and even then everyone's expectation were positive. Of course, this time we have a beat in P&D, but that might be baked in into the expectation.

Anyhow, I am having second thoughts.

Didn't sell the calls.

 

[juanmedina]

I think its an indication that, as discussed upthread, IV since ~early 2020 has been mad high and we're starting to return to the "normal"/pre-covid IV range.

Good news is that thesis means we're also in a decreasing volatility environment, which is of course good for selling options. Bad news, again, is that it means as time moves on one will continue to collects less premium from selling that volatility.

Low IV is a good time to buy calls!

If IV is trending down what is actually consider low IV to buy calls? All the OTM options that I hold keep on bleeding.

I closed my 805cc's for next week at 55% profit and like everyone else hoping for next week to be really green week to sell some calls.

 

[redan]

Hi all I have some DITM puts that expire today with schwab. SP was 4xcp750 and costs basis was 720 so it seems that I’ve “made” about $2800 if they are assigned. Is there any reason to think they may not be assigned?

You will be assigned. Your trade is in the money for you, but there’s no way of knowing whether the other party made or lost money. Basically you look at the put you STO and if it’s greater than the stock price, it will execute. In order to avoid assignment, you would have had to buy to close.

Now you get to play the other side of the wheel!

 

[buttershrimp]

You will be assigned. Your trade is in the money for you, but there’s no way of knowing whether the other party made or lost money. Basically you look at the put you STO and if it’s greater than the stock price, it will execute. In order to avoid assignment, you would have had to buy to close.

Now you get to play the other side of the wheel!

Sweet! thanks Yeah I figured I would get assigned which is good in particular for next week’s blue balls earnings call... (thanks POTUS) ... so assignment will probably will happen overnight or whatever schwab does... anyway, that’s what I hoped for, as long as it was above the breakeven... appears I “made” 2800... I assume this profit will show up in the cash basis of my new shares. For the sake of the wheel, if I’m trying to buy new shares with my weekly profits, I guess that would equate 4 shares. Is this how you guys would do it? Or do you only count the profit from covered calls for sake of share buying? I know it’s not how you have to do the wheel, but if you were trying to do the snowball method?

 

[redan]

Sweet! thanks Yeah I figured I would get assigned which is good in particular for next week’s blue balls earnings call... (thanks POTUS) ... so assignment will probably will happen overnight or whatever schwab does... anyway, that’s what I hoped for, as long as it was above the breakeven... appears I “made” 2800... I assume this profit will show up in the cash basis of my new shares. For the sake of the wheel, if I’m trying to buy new shares with my weekly profits, I guess that would equate 4 shares. Is this how you guys would do it? Or do you only count the profit from covered calls for sake of share buying? I know it’s not how you have to do the wheel, but if you were trying to do the snowball method?

That’s how you do the wheel although I try and focus on getting premiums without getting assigned. But I’d prefer to get assigned shares with a sold put than lose shares with a covered call.

My goal each week is to have both puts and calls expire unexercised. But like you, if I get put shares, I get more aggressive with the strikes and try to harvest the premiums and am ok getting called for those shares. I sell margin covered puts, so if assigned, I’m ok taking on more risk than my “owned” shares (where I am risk averse).

Hopefully we get a nice pop on Monday and you’ll have lots of alternatives on Monday to price covered calls.

Good luck!

 

[Mokuzai]

Sweet! thanks Yeah I figured I would get assigned which is good in particular for next week’s blue balls earnings call... (thanks POTUS) ... so assignment will probably will happen overnight or whatever schwab does... anyway, that’s what I hoped for, as long as it was above the breakeven... appears I “made” 2800... I assume this profit will show up in the cash basis of my new shares. For the sake of the wheel, if I’m trying to buy new shares with my weekly profits, I guess that would equate 4 shares. Is this how you guys would do it? Or do you only count the profit from covered calls for sake of share buying? I know it’s not how you have to do the wheel, but if you were trying to do the snowball method?

I think generally you shouldn't try to compartmentalize where the money for shares comes from. If you make money on a trade and you have cash on hand you can do with it what you will. Try not to get into the mental gymnastics of saying certain shares are "free" or "playing with house money" cause of some other trade.

Personally...and because I have a margin account...I try to keep at least a 10% cash buffer in the account at all times. Probably should be more with some of the contracts I keep open. If I feel there's too much cash in the account and I see an opportunity then I'll deploy some of that cash. Also with constant option income strategies have to set aside some cash for taxes.

 

[Criscmt]

After hours closed over $730. What does this mean for MM from 730C point of view, perhaps most of those contracts got close during market hours.
I wonder if the pinning effort needed lot of shorting l that needs to be covered on Monday, and besides that if there will be any pressure additionally from the $730+ close after hours?

 

[Tslynk67]

4 wins today (deja vu of last week)

Sold IC +p670/-p675/-c800/+p805 (same as last week, why not)
- the credit 0.83 is too small, so i opened 300 contracts to make up (coz son keeps harassing me daily to buy him a red MY; of course secretly i already decided yes)
- i made the puts low to reduce the risk of 125k max loss

Sold CC -c760 (i may regret this)
- not anymore; THANK YOU, Mr. Biden
- but just to be safe, 3:30pm BTC @0.02

Sold Short Strangle -p690/-c800 (first time trying SS, because more profitable than the CC and IC)
- first try is a success; double credits are really yummy
- 3:45pm BTC @0.01

Daytrading TSLA stock - Friday afternoon
- the SP up/down/up/down was too tempting; 5 quick buy/sell flips

Oh that's way too complicated for my monkey-mind... Any chance you could explain this as though you're speaking to a child?

 

[Yoona]

Oh that's way too complicated for my monkey-mind... Any chance you could explain this as though you're speaking to a child?

haha, you must be kidding... 90% of everything i know about options is from TMC, from guys like you!

if you are referring to my daytrading stocks, it's market buy 200 shares at a time and limit sell after ~$3 gain; rinse and repeat 5 times... i wasn't scared of doing this because if i ever have any leftover unsold shares, they will easily sell next week.

the reason i decided to daytrade yesterday afternoon is because rolling the 760cc to 750 was too risky for me, and i wanted income. Blessing in disguise coz the roll would have been a one-time credit and I am done for the day, but the daytrade income was repeatable.

 

[Buckminster]

My Saxo account doesn't let me do anything remotely risky - probably due to having 90% in LEAPS. Once sold later this year I hope to get into Iron strangles and short condors just to tell folk I did it.

 

[buttershrimp]

I’m loaded up baby, got assigned last night, but wait, what’s this? now I have enough margin to purchase 400 more shares. I am sort of thinking screw selling puts for the coming week, Because I want to be on the rocket ship in premarket this week. Maybe buy premarket 300 shares? Leave 100 cushion shares worth of margin cushion. And then sell calls when time is right this week. I just got a super low rate on margin from schwab, 2.5% thanks to advice on forum. For the coming week, I don’t mind dipping into margin. But would love to hear thoughts.... feel free to slap sense into me. I’m skipping selling puts portion of the wheel to get on board Monday morning.... I love this thread !!!!!