Wiki Selling TSLA Options - Be the House

[deerfield]

Anyway, all that was at $827, and here we’re are in the $830s now. There could still be an afternoon dip, but I’m good with it.

Sitting here waiting for this this to happen...have oct15 -830/880 C

 

[Tslynk67]

Finished up my positioning for next week. Mix of 615-715, 630-730 BPS. I've also observed (as many others have today) that the ones I opened 2 days ago are up around 50% already, while those opened yesterday are at 35%, those opened earlier today much less - of course.

That leads me to my obvious take from all this, which is I need to do a better job of just taking the profit on these spreads earlier than i have been. I've been waiting to see 80-90% profit, which generally means i'm closing on thurs/fri of expiration week. I need to adjust my outlook and start looking to close much more aggressively. Lots of folks on this thread have been talking about this lately, but the numbers today helped drive that home. If I had closed everything for 10/15 at 70% (ish), i would have been out wednesday and back into next week's spreads much earlier, which would already be at a much higher profit %. I could then more easily take advantage of closing them early and re-opening on a dip, or rolling them into narrower spreads for more leverage similar to what adiggs posted just above.

so more profit, and at the same time there's some risk reduction in that a spread a close and take profit from can't later reverse and become a problem.

I know this is probably obvious to most people here, but I wanted to write it out anyway - partially for myself, but also in case there are others working through the same ideas.

My personal experience is to open the BPS (or naked put) position in the first half of the week prior to the strike date. If the stock is volatile you can time the long buy and short sell to squeeze a little more premium

Then look to exit the position the following week Monday or Tuesday before the Friday expiry and open for the week after

For BPS I've only been selling during this bullish streak, but I've seen this schedule a lot during stagnation with naked puts and it fits for then too

 

[tradenewbie]

That's a huge jump today. I didn't BTC my 840 BCS earlier at 0.2 and watched it jumped back to 1.3. Although 840 BCS should be safe, I have finally closed it at 0.3 so I don't have to worry it. I still have 850 BCS and will BTC at 0.01

 

[Cherry Wine]

It's frustrating to watch next week's OTM call premiums continue to drop even as we move higher. Wish we had some of that good old 120% IV from 2019 right about now.

 

[adiggs]

Just to confirm, for this to work you had to double the number of contracts?

Yes. 1x 630/730 became 1x680/730 + 1x700/750. Net added 2.50 in doing so.

REALLY REALLY NOT-ADVICE
As I count things this is the #2 management technique used on BPS going against (where #1 is a roll that maintains the spread size). Here I'm using the management technique to generate some additional income, which also means that it won't be available should I experience a significant move against me. It's not free money - it's never free money, but I like the risk / reward for me in this position change.

 

[mongo]

Yes. 1x 630/730 became 1x680/730 + 1x700/750. Net added 2.50 in doing so.

REALLY REALLY NOT-ADVICE
As I count things this is the #2 management technique used on BPS going against (where #1 is a roll that maintains the spread size). Here I'm using the management technique to generate some additional income, which also means that it won't be available should I experience a significant move against me. It's not free money - it's never free money, but I like the risk / reward for me in this position change.

Huh, that's also a 680/750 and a 700/730. Much movement in middle.

 

[tradenewbie]

It would be very unlikely SP will drop <800 before earnings next week and it should be a safe strategy to close earlier before earnings even if we do 780 BPS. However, I just don't have the guts to do anything >700 (so thus last few weeks), and instead I only do BPS -680/+580

 

[UnknownSoldier]

So let me get this straight before I pull the trigger.

I have a 10/22 BPS entered at the 675/620 strikes. The legs are saying 2.85 and 1.62 at the moment.

So I'll collect $114 premium per spread, and I calculate my max loss as $2.85 - $1.62 = $1.23? Is this correct?

So max loss is $123 per contract? This means that my buying power reduces by only $123 per spread?

So I could hypothetically trade 1,000 of these 10/22 675/620 BPS and only use up $123,000 of my buying power??? While immediately getting $114k of premium???

If I'm doing my math right, this is ridiculous. It lowers my risk compared to just selling cash secured puts for the same amount of buying power and increases my potential profit by this much?!

 

[dc_h]

I've also noticed more new investors and more over the top excitement. That always makes me worried, in spite of the positive earnings coming up and the Q4 that seems on track to beat the likely amazing Q3 results. That said, I'm increasing my funds for BPS, but staying 15% away from the stock price. My earnings as a percent of investment will decline, but I'll feel much safer. It does seem bps pricing for 10/29 is lower than last weeks 10/22 pricing. I sold 710/650 and 705/645 bps for over 5 per contract. With the 5 day rise about 40, the 750/690 10/29 is only 4.33 and I would prefer to stay around 710 or 720 on the sell side for the 29th.
I'll sit on my 10/22's until next week and see how things progress. At this point, I'm likely to wait until earnings to roll my current positions. Adding money next week and will do something super conservative with that for the 29th. If we hit 900 next week, I may finally consider BCS on the other side of my puts. Glad I held out again this week, the payout under 850 last week was not worth the risk. No matter how good the earnings, there could be a sell the news event and then slow build to Q4 and full year earnings.

 

[mongo]

So let me get this straight before I pull the trigger.

I have a 10/22 BPS entered at the 675/620 strikes. The legs are saying 2.85 and 1.62 at the moment.

So I'll collect $114 premium per spread, and I calculate my max loss as $2.85 - $1.62 = $1.23? Is this correct?

So max loss is $123 per contract? This means that my buying power reduces by only $123 per spread?

So I could hypothetically trade 1,000 of these 10/22 675/620 BPS and only use up $123,000 of my buying power??? While immediately getting $114k of premium???

If I'm doing my math right, this is ridiculous. It lowers my risk compared to just selling cash secured puts for the same amount of buying power and increases my potential profit by this much?!

At risk is 675-620=55*100=$5,500 per contract.
$123 is the premium you receive per contract.
Not sure where the $114 is from.

 

[UnknownSoldier]

At risk is 675-620=55*100=5,500 per contract.

Ah okay I see. Spread width is calculated by strike prices, not net credit/debit. This makes more sense. So my hypothetical max loss is $5.5M (dohoho) and that means buying power needed is uh $5.5M. Thank you.

 

[mongo]

Ah okay I see. Spread width is calculated by strike prices, not net credit/debit. This makes more sense. So my hypothetical max loss is $5.5M (dohoho) and that means buying power needed is uh $5.5M. Thank you.

If you were doing a bear debit put spread, your at risk would be the ~123 (ask vs bid shifts things) you pay.

 

[corduroy]

Yes. 1x 630/730 became 1x680/730 + 1x700/750. Net added 2.50 in doing so.

REALLY REALLY NOT-ADVICE
As I count things this is the #2 management technique used on BPS going against (where #1 is a roll that maintains the spread size). Here I'm using the management technique to generate some additional income, which also means that it won't be available should I experience a significant move against me. It's not free money - it's never free money, but I like the risk / reward for me in this position change.

This is one of those things I have been reading about in this thread for a while and it just never really clicked, until it did. I had rolled up whole spreads for more profit, but not played with adjusting spread size and contract numbers.

I tried a variation on this with a far OTM spread that I had opened Monday.

I took 7x 550/650s, rolled the long put to $600, the short put up to $670 and increased the number of contracts to 10. This netted an extra $422 and no change in margin. Since I changed the strikes of the short put, I was able to do this on a single roll ticket (otherwise it said "invalid trade" keeping the same short put).

The original short leg was $118 OTM when I opened it, now with the SP increase even with rolling up I'm now $142 OTM. So even safer than the original spread, with no margin change, and more profit!

 

[doddiozil]

Been following this thread for a while. As the thread evolved it appears that people moved away from selling covered calls and cash covered puts, to start selling spreads. Mainly BPS (bull put spreads). Is that correct? and can someone explain how that is superior to just selling covered calls and cash covered puts?

I've been selling covered calls for about 8 months now with decent profits. But wonder If I could be doing a more profitable / less risky strategy.

Thank you

 

[bkp_duke]

Been following this thread for a while. As the thread evolved it appears that people moved away from selling covered calls and cash covered puts, to start selling spreads. Mainly BPS (bull put spreads). Is that correct? and can someone explain how that is superior to just selling covered calls and cash covered puts?

Leverage.

You need a lot less margin or cash backing a BPS than you do a put or shares backing a call. Therefore you can make a much higher return on the same cash sitting in your account.

Bull Put Spread: Definition, Strategies, Calculations, Examples

In a bull put spread, the options trader writes a put on a security to collect premium income and perhaps buy the security at a bargain price.

www.investopedia.com

 

[MikeC]

Holding all 10/22 -p700/+p600 into next week. If we keep going up, I am thinking about selling far OTM BCS to make an iron condor, rather than chasing the SP up with higher strike put spreads.

My guess is the ER will be great but the SP reaction will be muted, especially if we keep climbing into the ER.

Actually bought back 25% of these today and might make it 50% if we keep going up into the close because they're over 60% profit now. I think we get at least one dip and higher IV next week.

 

[BrownOuttaSpec]

Been following this thread for a while. As the thread evolved it appears that people moved away from selling covered calls and cash covered puts, to start selling spreads. Mainly BPS (bull put spreads). Is that correct? and can someone explain how that is superior to just selling covered calls and cash covered puts?

I've been selling covered calls for about 8 months now with decent profits. But wonder If I could be doing a more profitable / less risky strategy.

Thank you

Covered calls = not ideal, because stock very likely to go up with all the catalyst on the horizon (Q3 earnings and then Q4 earning) and Austin and Berlin GF coming online.

Covered puts = not ideal, because you use more margin than going with a BPS, there was a post a few pages back that explained the difference of you had $70k and the returns on each. Edit: Link to post: Wiki - Selling TSLA Options - Be the House

 

[doddiozil]

Thank you. I figured that was the answer but wanted to confirm. So instead of selling covered calls each week, it would make more sense for me to sell bull call spreads?

 

[bkp_duke]

Thank you. I figured that was the answer but wanted to confirm. So instead of selling covered calls each week, it would make more sense for me to sell bull call spreads?

Not advice, but the return on capital is higher. You need to know the risks, however, as if you get ITM on a BPS you have to roll it or make another adjustment to avoid a gigantic loss. There is more risk than a CC or cash-secured put. That's why most people here are trading pretty far away from the share price, and for expirations about 7-10 days out.

 

[samppa]

Been following this thread for a while. As the thread evolved it appears that people moved away from selling covered calls and cash covered puts, to start selling spreads. Mainly BPS (bull put spreads). Is that correct? and can someone explain how that is superior to just selling covered calls and cash covered puts?

I've been selling covered calls for about 8 months now with decent profits. But wonder If I could be doing a more profitable / less risky strategy.

Thank you

Well here's an example, from tonights option chain, for oct22.
- one 800 put nets 11.15 credit, reserves at most around 80k margin
- a -p800/+p700 bull put spread nets $8 and reserves 10k backing

So I can sell 8 spreads, and get $64/share, or $6400 for equal margin. It's leverage.
BUT now my max loss is at 700 strike. With a naked put, max loss would be at 0.