Wiki Selling TSLA Options - Be the House

[Max Plaid]

Random thoughts on ITM CC management.

Say I'm short 10x 190cc's for next week and they're looking to end up ITM. We've discussed many times how to deal with this. One can roll out in time for credit, roll up in strike (and out in time) for breakeven, even further up in strike for a debit, etc.

In the past I sometimes rolled 9 of the 10 one week out to the same strike, using the credit received to increase the strike price of the remaining CC. However, when ATM it seems one can tweak this last step and just simply (example, but possible with current premiums):

BTC 10x 5/3 -190cc
STO 9x 5/10 -190cc

The larger the pool of cc's you have open, the more you can "downsize" the position.

Anyone have any experience managing like so? I'm guessing @Max Plaid might. Any dangers I should be considering?

It does feel like a bad trade since I throw away premium on closing ITM cc's and I lose my hedge for when things reverse. This strategy only seems worth it if SP keeps climbing.

But then I wonder if I'm not better off just rolling for strike improvement.

Yes indeed, this is a a strategy I use a lot, and add puts into the mix too, like today: 100x 5/3 -c175 -> 80x 5/10 -c175 + 100x -p180

Another thing that can be done, although it may seem somewhat contrary is to roll calls down and reduce the expose, so (pure example, didn't check the prices, etc.) 10x 5/3 -c190 -> 5x 5/10 -c180, reducing the number of calls, then you can also straddle some puts with that and/or sell the other 5x remaining at a much higher strike

Either strategy works well the the SP pulls back, as opposed to rolling up and out when you can then get a bit stranded if the SP goes sideways

Just ideas, not advice...

 

[Yoona]

10x 5/3 -c190 -> 5x 5/10 -c180, reducing the number of calls, then you can also straddle some puts with that and/or sell the other 5x remaining at a much higher strike

another secret trick!

 

[Patrick66]

Yes indeed, this is a a strategy I use a lot, and add puts into the mix too, like today: 100x 5/3 -c175 -> 80x 5/10 -c175 + 100x -p180

Using your example you are essentially banking on increased volatility in a short time frame, no?

Do you have any tools to evaluate your risk/exposure across your holdings, or do you just have sufficient cash to cover short term needs?

 

[jeewee3000]

Yes indeed, this is a a strategy I use a lot, and add puts into the mix too, like today: 100x 5/3 -c175 -> 80x 5/10 -c175 + 100x -p180

Another thing that can be done, although it may seem somewhat contrary is to roll calls down and reduce the expose, so (pure example, didn't check the prices, etc.) 10x 5/3 -c190 -> 5x 5/10 -c180, reducing the number of calls, then you can also straddle some puts with that and/or sell the other 5x remaining at a much higher strike

Either strategy works well the the SP pulls back, as opposed to rolling up and out when you can then get a bit stranded if the SP goes sideways

Just ideas, not advice...

Yeah I also write puts and straddle those against the cc's.

I guess the question is how you want to position yourself delta wise. (And that depends on strategy, future SP expectations, etc)

 

[MikeC]

My go-to technique for ITM CCs is to let them get DITM and then double the number of contracts, using the extra premium to bring the strike up. For example, today I rolled 5/3 -c155 to 2x 5/3 -c175 when we were above 195.

Benefits:

-Allows patience with ITM CCs. You want them to go deeper ITM to get the new strike as high as possible so there's no urgency to roll or flip ASAP. So if they don't go deeper ITM and the stock retraces that means the patience paid off and your original position improved.

-You're increasing leverage against the stock movement, i.e., increasing short call contracts after a big run. As opposed to flipping short calls to puts at a local top and then getting whipsawed on the way back down.

-You go from a DITM position with ~$0.00 credit rolls to a position that can potentially roll for credit or strike improvement, especially if the timing was good and it retraces after you leveraged up.

Downsides:

-You're still ITM and you have more contracts now.

-You can't double more than once or twice without exponentially increasing your covered shares.

 

[jeewee3000]

My go-to technique for ITM CCs is to let them get DITM and then double the number of contracts, using the extra premium to bring the strike up. For example, today I rolled 5/3 -c155 to 2x 5/3 -c175 when we were above 195.

Benefits:

-Allows patience with ITM CCs. You want them to go deeper ITM to get the new strike as high as possible so there's no urgency to roll or flip ASAP. So if they don't go deeper ITM and the stock retraces that means the patience paid off and your original position improved.

-You're increasing leverage against the stock movement, i.e., increasing short call contracts after a big run. As opposed to flipping short calls to puts at a local top and then getting whipsawed on the way back down.

-You go from a DITM position with ~$0.00 credit rolls to a position that can potentially roll for credit or strike improvement, especially if the timing was good and it retraces after you leveraged up.

Downsides:

-You're still ITM and you have more contracts now.

-You can't double more than once or twice without exponentially increasing your covered shares.

Yes in theory one should wait for the expected "top" and then split the DITM cc's into lesser ITM cc's. But hindsight is 20/20.

 

[EVNow]

Say I'm short 10x 190cc's for next week

Well, I'm short 190 CC. I didn't even realize that as on Friday I got a notice from Fidelity of order cancelled with nothing done. Turns out they executed most of the contracts, cancelling out only a few ! Talk about nasty surprises ....

Thankfully I'm only selling half or less of contracts on any day. So, I've rest of the shares to rescue on Friday.

 

[MikeC]

Yes in theory one should wait for the expected "top" and then split the DITM cc's into lesser ITM cc's. But hindsight is 20/20.

It doesn't just have to be a top to make it worth it. They just have to be DITM, the deeper the better (assuming the SP doesn't spike after you do it and never come back down).

I didn't understand the mechanics before, so I was doubling ATM contracts to move them up $5 OTM and getting run over super quick. Now by patiently waiting for them to get DITM, I can move the strike up a lot higher for the same number of contracts added. And then sometimes I don't need to because the stock comes back down anyway while I'm waiting.

 

[thenewguy1979]

Today was one of those rare crazy day.

But it seem we missed closing over the upper BB band by a couple cents.

 

[Max Plaid]

Using your example you are essentially banking on increased volatility in a short time frame, no?

Do you have any tools to evaluate your risk/exposure across your holdings, or do you just have sufficient cash to cover short term needs?

Well I have quite a lot of cash on hand, and hopefully morein the coming weeks when I offload the 500NVDA I got put at $950!

But essentially I'm just trying to reduce the number of contracts, if you can manage 20x per week then in a month they're gone

Plus I do have lots of long positions I can roll against if I have to, and there's the mega-straddle at Dec 2025 -190 that can be used to cover a multitude of sins, but that's getting a bit over-used right now as I have 45x sitting there and the puts are beginning to drag on my cash availability...

Also worth noting that rarely are ITM calls actually called away, if we were talking about weekly puts being 15% ITM then we start to get nervous, but calls, doesn't seem to happen very often

 

[thenewguy1979]

TSLA daily chart.

We did broke through the upper BB on the daily and RSI is at 71.

 

[Yoona]

SMCI earnings tomorrow, someone knows something?

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[khill]

Based on the chart, do you think it will break out?

 

[Yoona]

Based on the chart, do you think it will break out?

SMCI expected move is 13.3%, 777-1014

 

[thenewguy1979]

Seem super quiet here today after such a big day.

Hope everyone is doing fine after the crazy PA.

 

[khill]

Would have been right there with ya buddy. TWT.. I’ll say this. I think it’s still $140 before $240 (I could really probably bring that in a bit) but $90 would still take a LOT. However, I don’t think ppl have done enough analysis of the IRA (not an individual retirement account) and what a total elimination of all battery production, EV incentives, domestic backup incentives, investment incentives for domestic battery production would do to pretty much ANY non-hydrocarbon companies revenues and earnings projection. so, watch this space.

We are almost at 200 now. Do you still think we will go to 140 before 240 or did the 40% move over the last 4 days change anything from your perspective?

 

[tivoboy]

We are almost at 200 now. Do you still think we will go to 140 before 240 or did the 40% move over the last 4 days change anything from your perspective?

Not enough. We'll see

What we’re in at the moment is a short squeeze. This too shall pass.

 

[BornToFly]

A perk as a moderator is that we can access all deleted posts. Going back to January 1st I see that no posts about FSD written by you were deleted. Only a post about racism and posts in a CT discussion which turned nasty (not your fault).

Major FSD developments can be discussed in this thread, no doubt about it, but it’s no place for back and forth about technical details.

There is no way that is correct, because I was getting very frustrated with not being allowed to mention FSD 12 as a catalyst in this thread, while everything else seemed to be on the table.

 

[Cherry Wine]

Trading is like a game of poker with no blinds or antes. It's like a poker game where you can fold every hand until you're dealt a monster. But rather than it taking a few minutes or a couple of hours to be dealt a playable hand in poker, it can take months in the stock market.

In trading, Mr. Market is the dealer and he's dealing you a new hand every day, whether you like it or not. He's dealing you a new hand every second, every minute, every hour, every day, every week. It's like a small poker game inside a bigger poker game inside an even bigger poker game. You are playing every game at the same time, only you get to choose which table you bet on.

If you've played poker I'm sure you know the kind of players that like to announce to the rest of the table when they folded an awful hand, like 2/7, and the flop comes 2,2,7. In this example, we would probably all think we shouldn't have folded after seeing the flop.

The same is true of the trading. But unlike poker, you never really fold your hand in the stock market. You can place a bet after you've been dealt more cards (after the stock has shown you more information). And now you should better understand your odds, in which case you can increase your bet size and leverage up. Even if you only capture a percentage of the larger move you can make a ton of money with low risk.

I will celebrate tsla's phenomenal week with all bulls who correctly traded this jump, but I'm waiting for more cards to be dealt.

As a former poker player, I love this analogy.

 

[dl003]

The chart screams short squeeze, structureless. It didnt get to 159, invalidating the rising wedge. it strengthens the case for 265 later this year.

Its is very dangerous to call the top right now as it has made fresh new highs on the daily rsi. huge momentum on MACD that will take at least a week to cool down and possibly curl down. Id sit back and wait for bearish divergence on the daily, or at least on the 4h followed by a reversal candle, then a few follow through candles, then a weak retest before having conviction on CCs.