Wiki Selling TSLA Options - Be the House

[phantasms]

Typed this earlier in the morning but had to run out and forgot to hit send. Obviously I could have done all this a little more profitably if I waited but all is well....



I got lucky with a decent price and wiped out my $820 for next week for a small loss.

Letting my week 850 and 900 ride.

Sold a $750put as that felt like the right balance between "please please please give me my shares back" and "this put stuff is quite profitable".

 

[TheTalkingMule]

It took a 2.6% drop in QQQ and mid-morning low volume to let MM's push TSLA down 1.5%. To me that means we should be able to pop back to $800 with the tech macros before Friday. We shall see.

Bought a few cheap $800c 10/1 at(one would hope) the bottom. Lets see if QQQ takes back half this loss in the afternoon....

 

[adiggs]

Looks like I have to roll a SHOP position. If I roll the sold put, as this is my first time rolling a BPS, do I just pick a strike next week with a credit and then add a bought put separately? Best to just close the bought put for profit?

And somehow put myself into a diagonal spread. Not sure what I'm actually hoping for at this point.

If you're wanting to get into a new BPS, then I'd roll the package deal (that's what I do). If you have near long puts and further short puts, then the margin calculation is VERY different from a spread. What makes a put spread work, margin wise, is that the two options have the same expiration.

So I enter a 4 legged ticket: BTC and STC the current position PLUS BTO and STO the new position. And all of that wrapped up into a net credit or debit.


The thing I've seen with tickets like this is that, at least with Fidelity, the suggested limit order is the worst of the bid/ask on all 4 options. That adds up to a fair bit. I tend to enter these near the midpoint, or since I'm rolling for a net credit I'll set the limit somewhere between the bottom and the midpoint. The difficulty with sticking to your specific credit too strongly is that there are 4 moving pieces and I've seen these take time to fill, even when the price I've offered is quite generous.

 

[KTC Lurker]

Ok, somehow have put myself into a diagonal spread.

If you're wanting to get into a new BPS, then I'd roll the package deal (that's what I do). If you have near long puts and further short puts, then the margin calculation is VERY different from a spread. What makes a put spread work, margin wise, is that the two options have the same expiration.

So I enter a 4 legged ticket: BTC and STC the current position PLUS BTO and STO the new position. And all of that wrapped up into a net credit or debit.


The thing I've seen with tickets like this is that, at least with Fidelity, the suggested limit order is the worst of the bid/ask on all 4 options. That adds up to a fair bit. I tend to enter these near the midpoint, or since I'm rolling for a net credit I'll set the limit somewhere between the bottom and the midpoint. The difficulty with sticking to your specific credit too strongly is that there are 4 moving pieces and I've seen these take time to fill, even when the price I've offered is quite generous.

Thanks - It was stressful, but I've rectified. STC the bought put and BTO a new put for the following week, getting back into a BPS. Lost some money today, learned some lessons, and some about TWS. Now just need to hope for a rebound...

 

[adiggs]

Busy busy morning for me. The big deal is the shuffling in a 2nd retirement account to bring it into my assets under management. Now I have 3 blobs of cash / call options that I am actively managing for income. A big driver for this change are the results from the 1st retirement account I've been managing this way since June. The second big driver is that I wanted to close out some cc for Sep '22 at the 840 strike - they were the best choice I knew how to make when I opened them, but I've learned enough since then that I won't be selling 1 year options again. They did serve their purpose and I did earn a pittance overall.

The best part is that I've increased the long term delta in that account by a significant amount (20%) as I've shifted shares into June '22 600 strike calls. I expect that as the cash balance increases from put sales I'm more likely to be adding to the leaps than continuing to increase the quantity of put spreads. Because, you know, I don't have enough overall portfolio delta from TSLA (/s).


To celebrate the big changes I've opened 10/1 630/730 put spreads for around $5 all around. My belief is that we won't challenge 730 and I'd like the position to be closed by Friday, when I expect IV to be even higher and I'll be looking to use these resources to sell 10/8 BPS. It's a lot more than beer and sushi money, but its still more of a placeholder while I wait and see how the week unfolds.

My relatively small lcc 800s for this week continue to ride. I opened these semi-seeking assignment, with a larger plan of rolling out 1-4 weeks if seriously challenged (probably need to be a few $$ ITM to roll). I'm not particularly seeking to roll these at this time, and I'm definitely not looking to take a loss on these. I've started looking at roll options and going out a week and up to the 810 strike looks like I can get a pretty good net credit as well. So they're producing income and I need to sell those Dec 2021 500s sooner than later, so might as well try some I-dare-you call sales!


Something I've been thinking about is when the best time for sales are. Broadly speaking I like to sell into strength now. Selling puts on down days, calls on up days - that sort of thing.

But bigger picture I see the 700 strike as strong support, and thus put sales at 700 and below are as safe as I need them to be. The thing is that as the shares move away from 700 the credits at 700 and below are going down. I'm selling puts at 730 now and getting excellent premiums. I expect the shares to keep going up, and thus my put strikes will keep going up. BUT those put strikes won't be going up as fast as the shares. I don't want to get too far from strong support, and I'll be looking for a new strong support strike before I move the puts a lot closer to the share price.

Same idea on the call side. I'll bias towards more aggressive as we reach resistance going up. I think that'll be 850 or 900, but we also didn't spend much time when we last visited these levels, so I don't yet see a strong resistance level. 800 might be that resistance strike, but I'll need to see the shares bounce down from 800 through the next month before I'm ready to call that strong resistance.

My accounts are heavily biased towards upwards moves in the share price. That actually bothers me as an important component of my larger strategy is to be earning income in both directions on share price moves. For the time being, like most of the rest of you, I have such a strong bias upwards on the shares that I'm being restrained in my call sales (mostly means that I'm leaving most of my positions uncovered and free to run).

 

[dc_h]

I am looking at my trade diary/logs and wanting to make another trade. I think I have well thought out plans over the weekend and wait for the market to settle on Monday before making any decisions. The last few weeks, these trades have all done well. My error is wanting to do too much and making a tighter trade as the week goes. Everyone has different styles and different goals, but my intent is to limit my risk and avoid gambling. I eyeball what I think is the standard deviation trend and try and keep the odds of hitting my strike down to about 10%. I can roll if I'm in danger, but I can make 5-10% return on my cash position week after week and keep 90% of my shares and calls alone. Everyone needs to make their own judgement of what is right, but I think everyone should set some reasonable goals and boundaries. Lycanthrope has different goals from me, where he has an exit price and readiness to step away from shares. I'm making much smaller bets and funding smaller goals.
What are your goals, what are you trying to achieve and what are you willing to risk and how will you recover from a sudden loss? When you have a few wins in a row, it's easy to forget that you can lose and that different types of events will have different impacts. We don't know what we don't know and it its easy to fixate on P&D, FSD and other Tesla specific issues and forget that the larger market doesn't care about Tesla, or that the market makers just want a targetable change in value that they can hedge. The market makers, macros and fundamentals are all neutral, they don't care about you. On any given week, one of these can be more powerful than the other two, but I'd guess the market makers are going to anticipate the macros better than most and try to make that work for them. Most of us know the fundamentals of Tesla better than the market makers and that is our great advantage.
Sorry for the long post, just seeing people hit the guardrails a lot this week and wish everyone the best results here.

 

[adiggs]

Ok, somehow have put myself into a diagonal spread.

Thanks - It was stressful, but I've rectified. STC the bought put and BTO a new put for the following week, getting back into a BPS. Lost some money today, learned some lessons, and some about TWS. Now just need to hope for a rebound...

The lessons are the important thing, whether they come from wins or losses. The way I see it, a lesson is recognizing something about a situation that went well or not, that you knew WHEN YOU DID IT that you would do the same next time (you have a similar knowledge / instinct setup) or that you want to differently the next time you have a similar setup.

The key here is that you can't revisit a decision from the past, and change it so you have the benefits of that different decision. What you CAN get is insight in what you knew then, and what you'd differently in a similar situation in the future.


An example from my own past. Back in the 08/09 crash I found a dividend paying company that was paying out nearly 11% with a multi-year history of increasing the dividend each quarter. I researched it from 2 weeks, sure that I was missing something. Company should have been trading at $80 but was on sale for $40. Finally bought in and held that position for 7 or 8 years or so.

I even told people about it over the years. The problem was that I didn't buy NEARLY enough of it. I dabbled. Should have gotten $50k worth and instead got $5k worth. The lesson - when I have a strong conviction about an investment, and strong convictions are rare (that was my 3rd or 4th in my life), then don't dabble.

Which served me well when Tesla came along. I'd test driven Model S, back when test drives were just starting (Sep/Oct 2012 or so), and had my iPhone moment. The product mattered and this was so outrageously good I just had to get me some. We bought our original TSLA position in November and we bought as large / concentrated of a position as we were willing to do. And that's made all the difference. (I'm a LOT more comfortable with concentration now ).


So what did you know when you did it, than in retrospect you'd do differently (good or bad). You can't do anything about the past, but you can have that experience in mind when a similar situation arises in the future.

Creating these experiences are why I think its so important to be trying out new types of positions as you encounter them and think they might have value. For me that was some early BPS to learn the mechanics, before I've gone big time with using BPS to replace naked / cash secured puts. And intentionally turning the wheel on a position - it IS, after all, one of my backup management strategies.

 

[adiggs]

Sorry for the long post, just seeing people hit the guardrails a lot this week and wish everyone the best results here.

Long! You're just barely getting started

 

[mickle]

Well, after selling CCs for the last year, and then a few puts, I finally decided to try out this BPS stuff everyone has been talking about.

I got margin enabled on my Fidelity account last Friday, but for some reason they only gave it to me on the 5% of my account that wasn't Tesla. Finally had to call them about it today, and then they enabled the rest of my margin on the Tesla shares. Not sure why it got held up.

So sold a very safe 10x BPS at 610/680 to learn more about how it works. With the market dropping so much today, I want to make sure a 10% drop wouldn't get me.

 

[TheTalkingMule]

Sold 10/8 BPS $740/650 @ $11.

Look at me, I'm taking risks like a rational adult!

 

[corduroy]

I keep building that put wall higher. STO BPS 700/600 $5

Closed the calls I sold this morning at 72% profit. (which was an unintended day trade)

 

[AquaY]

Looks like I sold my BPS too early. I'm at my chosen exposure limit so I don't want to add to these positions. Darn it.

 

[Discoducky]

Well, after selling CCs for the last year, and then a few puts, I finally decided to try out this BPS stuff everyone has been talking about.

I got margin enabled on my Fidelity account last Friday, but for some reason they only gave it to me on the 5% of my account that wasn't Tesla. Finally had to call them about it today, and then they enabled the rest of my margin on the Tesla shares. Not sure why it got held up.

So sold a very safe 10x BPS at 610/680 to learn more about how it works. With the market dropping so much today, I want to make sure a 10% drop wouldn't get me.

You picked, seemingly, a great time and strikes as that put wall is pretty spectacular at $700 for this week.

I went with 5x STO $750 put for this week.

 

[adiggs]

I'm not convinced I took the most effective route, I'm not convinced I timed the market but I'm out of the calls, have more exposure to the stock and am risk-reduced in case of a market crash

Something I've learned for myself - I try not to put too much energy into whether I did the most effective, or caught the market at just the right moment. I don't have the technical analysis chops to even pretend at it, and I wouldn't put the energy into using the skills even if I had them. I'd spend too much of the day watching the tick by tick changes.

So today I did my ins and outs around $10-13 down. Whether it was the best on the day or not, I knew it was good. The BPS were better than at $790 where the shares opened the day, and all those calls I BTC / BTO - all that buying was at a better price than shares at $790 (the shares sales were worse, but there were a lot more calls being bought).


And closely related - when I really want a position (in or out), then maybe try once or twice near the bid/ask for my fill, but in something that is trading actively (like those 800 strike calls for this Friday) just go Market and be done with it.

One of those previous lessons in both gamma squeezes and fiddling over pennies on a fill - I had a Friday last August where I missed a fill by <0.10 early in the morning, at some price under $1. I watched those covered calls go $250 ITM (low $1400s to $1750s) that day as I kept chasing a better fill than was on offer at the moment. Guess where those $840 ($4200 at the time) strike Sep '22 calls came from . Lesson - try 1, maybe 2 times, for a desirable fill. But in an actively traded instrument, be quick to just fill and be done with it.


This all makes me a pretty desirable customer to the brokers I figure. As long as I'm sweating the dollars, and giving them the pennies, that must make me just about an ideal customer.

 

[EV forever]

Looks like I sold my BPS too early. I'm at my chosen exposure limit so I don't want to add to these positions. Darn it.

Same here - definitely added them too early, between yesterday and this morning when stock was as 780. Don't want to add anymore in my brokerage account - too close with the margin exposure limits for my comfort.

However, in the IRA, I sold 600 shares and added LEAPS - also too early I think, but for over 2years expiration, it is fine. Strikes that I now have are 550, 850 and 950 for June'23 and 690 & 840 for Jan'24. Also added some 690 strike for 19Nov2021 as a bet for the Q3 results.

I don't fully understand how the margin portion is working for the IRA - with level 2+. Keeps telling me I don't have sufficient intraday power, but I do have overnight trading power? Well, then I realized that I could use this money to buy calls or shares if I change the "margin" option to "cash" while placing the order. I guess it means I cannot use the cash to sell spreads which requires cash to cover margin?

Anyways, fully leveraged now to the extent where I wanted to be. About 60% stocks and 40% in calls and LEAPS, with reasonable cash set aside for selling spreads. Now, let the games for Q3 begin

 

[mickificki]

Same here - definitely added them too early, between yesterday and this morning when stock was as 780. Don't want to add anymore in my brokerage account - too close with the margin exposure limits for my comfort.

However, in the IRA, I sold 600 shares and added LEAPS - also too early I think, but for over 2years expiration, it is fine. Strikes that I now have are 550, 850 and 950 for June'23 and 690 & 840 for Jan'24. Also added some 690 strike for 19Nov2021 as a bet for the Q3 results.

I don't fully understand how the margin portion is working for the IRA - with level 2+. Keeps telling me I don't have sufficient intraday power, but I do have overnight trading power? Well, then I realized that I could use this money to buy calls or shares if I change the "margin" option to "cash" while placing the order. I guess it means I cannot use the cash to sell spreads which requires cash to cover margin?

Anyways, fully leveraged now to the extent where I wanted to be. About 60% stocks and 40% in calls and LEAPS, with reasonable cash set aside for selling spreads. Now, let the games for Q3 begin

This kinda ties into @CHGolferJim 's question below but why the 850 and 950? and 840 for 2024?

 

[Discoducky]

I think I'm reading this right, but please enlighten me if not:

So, today there was seemingly very high volume on the $800 call

Which should show up in the OI interest chart tomorrow.

It could show up as higher or lower depending on what happened today with the volume balance.

Correct?

 

[Tslynk67]

Wow, you sold all your shares .
Why the Jan24 $800 instead of $600 (20% ITM)?

Sorry, that's a typo, of course I bought c600's, not c800's, will correct in the original, cheers!

20 calls versus 2000 shares is simple risk-management - you get all the upside of the stock, but only 40% exposure on the downside

 

[MP3Mike]

Which should show up in the OI interest chart tomorrow.

It could show up as higher or lower depending on what happened today with the volume balance.

Correct?

Correct, or it could not show up at all if there were an equal number of opens/closes...

 

[Tslynk67]

This kinda ties into @CHGolferJim 's question below but why the 850 and 950? and 840 for 2024?

Typo, I bought c600's, not 800's