Wiki Selling TSLA Options - Be the House

[samppa]

Question for those who buy more shares with proceeds from option sales:
Do you buy the shares right after you've sold the option (with the cash you received from the sale),
or do you wait until you have closes the particular option before purchasing more shares?
What's your take on this?

 

[Tslynk67]

Question for those who buy more shares with proceeds from option sales:
Do you buy the shares right after you've sold the option (with the cash you received from the sale),
or do you wait until you have closes the particular option before purchasing more shares?
What's your take on this?

I buy them immediately, one could wait until later in the week on the premise that the SP tends to drop on Thursday/Friday, but I'm not convinced this is a definite thing, or just a myth we perpetuate...

 

[samppa]

I buy them immediately, one could wait until later in the week on the premise that the SP tends to drop on Thursday/Friday, but I'm not convinced this is a definite thing, or just a myth we perpetuate...

So if you end up buying the option to close, do you just dip into margin for that?

 

[Tslynk67]

So if you end up buying the option to close, do you just dip into margin for that?

I don't have a margin account, but I tend to keep a few $$$ lying around to rebuy calls towards Friday close and then maybe fish for some closer to the money in the final hours.

Are you saying that you don't plan to roll the calls if the stock ends up significantly higher than $800 on Apr-30?

Well never say never, but I'm OK selling shares at $800 as it gives some protection to the downside. Plus I don't have a roll feature with my broker, so I'd need some spare cash to facilitate it.

 

[st_lopes]

That was short lived. With the stagnating price the last couple days, and the fact that three of our MAs are now below 680 and are likely to be resistance until we get a meaningful catalyst (P&D or Q1), I decided to roll the 900c 06/18 down to 680c 04/01. Back to an inverted strangle! I did clip about $10/contract on this roll and the roll also added $0.75/contract in remaining premium.

Last week was interesting. Questrade implemented the last tranche of their Margin Requirement increase on TSLA (went from 40% to 50%). This was on top of the bearish price action. Those two variables left me in an interesting position of being in a margin call on Thursday (courtesy those sold 850p 04/16 that I am still HODLing).

So, how does one get out of a margin call without actually selling any positions they don't want to sell? As I've learned, buying low strike puts doesn't work when you have already sold puts on margin which are now DITM. Plus you can only buy the contracts when you're not already in a margin call. Instead I rolled those 06/18/2021 covered calls to covered LEAPs. Not the ideal trade, but it allowed me to not only clip $10.6/contract off of the 680 04/01, but add a net $100cr/contract, and got me comfortably out of the margin call. So, as of close of last week, my strangle (if I can still call it that) was now:

• -17x 1300c 01/20/2023;
• -22x 850p 04/16/2021;

That was, until this morning where another bearish price action day got me close to the line, so I rolled it once again, clipping $7.6/contract, for a net $20cr/contract, to 1200c 03/2023. So, revised strangle:

• -17x 1200c 03/17/2023;
• -22x 850p 04/16/2021;

Intent here is that if/when Questrade relaxes their MR% again, or once we get more bullish price action, that I can roll these sold LEAPs to a closer expiration at a more "reasonable" near term strike. This was more a margin maintenance play than a premium clipping play. In other words, I will not mind giving back the clipped premium in a net debit roll down.

Though I suppose that the worst case scenario of having pre-sold my shares at $1200/share for March 2023 is not the end of the world.... until of course the stock is trading at 2x that at that date...

 

[bkp_duke]

Question for those who buy more shares with proceeds from option sales:
Do you buy the shares right after you've sold the option (with the cash you received from the sale),
or do you wait until you have closes the particular option before purchasing more shares?
What's your take on this?

I have done both. Right now, I am "reading" the charts as we are in a side-ways trend with oscillation. I was buying shares immediately, but more recently have been waiting for share price to be in the low 600s before buying. This of course could change with news any day, but that has been my short-term play.

 

[cbh03]

Question for those who buy more shares with proceeds from option sales:
Do you buy the shares right after you've sold the option (with the cash you received from the sale),
or do you wait until you have closes the particular option before purchasing more shares?
What's your take on this?

I have been buying shares right away. To qualify, I am only selling puts (not CCs) and some of my puts are pretty deep in the money right now, so I am rolling them for a slight credit. If I need to buy to close the puts for some reason, then I will need to pull in money from somewhere else (i.e., I don't have enough cash in the account to close them). Another qualification, I am new at all of this so my methods may be far from optimal.

 

[Yoona]

Question for those who buy more shares with proceeds from option sales:
Do you buy the shares right after you've sold the option (with the cash you received from the sale),
or do you wait until you have closes the particular option before purchasing more shares?
What's your take on this?

I buy shares asap. Then, just sell if i need $ for CC buyback - that's the dips on my chart. Strategy is so far, so good!

 

[pz1975]

I have been using the proceeds of my sold puts and calls to buy 2023 $800-1,000 LEAPS. I intend to convert them to shares once the SP gets to 900-1,000. I want to take maximum advantage of the inevitable rise and 2023 LEAPS give more leverage than shares while still being (IMO) quite safe.

 

[juanmedina]

Last week was interesting. Questrade implemented the last tranche of their Margin Requirement increase on TSLA (went from 40% to 50%). This was on top of the bearish price action. Those two variables left me in an interesting position of being in a margin call on Thursday (courtesy those sold 850p 04/16 that I am still HODLing).

So, how does one get out of a margin call without actually selling any positions they don't want to sell? As I've learned, buying low strike puts doesn't work when you have already sold puts on margin which are now DITM. Plus you can only buy the contracts when you're not already in a margin call. Instead I rolled those 06/18/2021 covered calls to covered LEAPs. Not the ideal trade, but it allowed me to not only clip $10.6/contract off of the 680 04/01, but add a net $100cr/contract, and got me comfortably out of the margin call. So, as of close of last week, my strangle (if I can still call it that) was now:

• -17x 1300c 01/20/2023;
• -22x 850p 04/16/2021;

That was, until this morning where another bearish price action day got me close to the line, so I rolled it once again, clipping $7.6/contract, for a net $20cr/contract, to 1200c 03/2023. So, revised strangle:

• -17x 1200c 03/17/2023;
• -22x 850p 04/16/2021;

Intent here is that if/when Questrade relaxes their MR% again, or once we get more bullish price action, that I can roll these sold LEAPs to a closer expiration at a more "reasonable" near term strike. This was more a margin maintenance play than a premium clipping play. In other words, I will not mind giving back the clipped premium in a net debit roll down.

Though I suppose that the worst case scenario of having pre-sold my shares at $1200/share for March 2023 is not the end of the world.... until of course the stock is trading at 2x that at that date...

Ouch that doesn't sound like fun. I was able to get out of all my naked put positions last Friday and now I am waiting to deploy some of my margin into buying LEAPs. I almost did that today but I am trying to wait for the P&D numbers. I haven't sold any call this week .

 

[st_lopes]

Last week was interesting. Questrade implemented the last tranche of their Margin Requirement increase on TSLA (went from 40% to 50%). This was on top of the bearish price action. Those two variables left me in an interesting position of being in a margin call on Thursday (courtesy those sold 850p 04/16 that I am still HODLing).


Ouch that doesn't sound like fun. I was able to get out of all my naked put positions last Friday and now I am waiting to deploy some of my margin into buying LEAPs. I almost did that today but I am trying to wait for the P&D numbers. I haven't sold any call this week .

It wasn't fun, but not as bad as the first run down to $500s. I did liquidate things I didn't want to liquidate at that point. Though for the most part I came out of it with the same amount of share exposure, though now more exposure through bought LEAPs rather than shares.

It's been a learning experience on various maintenance excess management techniques.

For instance, rolling the puts for a net credit didn't do anything for maint excess. That was what I was going to do at first, as I liked the psychology of rolling a put more than rolling calls. Turns out it does absolutely nothing for you since you've still sold the puts on Margin. Rolling covered calls does the trick.

 

[cbh03]

Turns out it does absolutely nothing for you since you've still sold the puts on Margin.

Can you explain this part further? Do you mean that, because you have sold puts without sufficient cash in the account to cover them if they were exercised, those puts are "sold on Margin?" If so, is there any charge from your brokerage for using this margin, even though you are not actually borrowing money from the brokerage if the puts are not exercised?

 

[st_lopes]

Can you explain this part further? Do you mean that, because you have sold puts without sufficient cash in the account to cover them if they were exercised, those puts are "sold on Margin?" If so, is there any charge from your brokerage for using this margin, even though you are not actually borrowing money from the brokerage if the puts are not exercised?

That is correct. I have puts sold using Portfolio Margin. Don’t pay interest unless you get assigned shares or your net equity position in the margin account goes negative.

 

[Chenkers]

I've found rolling Puts does improve portfolio margin, but only minor, in the order of $2k. Selling CC is much more impactful for improving maintenance margin.

One major lesson I've learned from having Puts assigned is to roll Puts out far enough that the extrinsic value is sufficient to discourage early assignment. With DITM sold Puts the extrinsic value becomes negligible in the last week so rolling to 2 or 3 weeks out minimum is needed to reduce the risk of assignment. It's a real PITA to see available cash or margin being used to purchase shares way above the current bargain prices.

 

[juanmedina]

sold 14x 715c for $0.8 for Thursday.

 

[Criscmt]

Yesterday and today sold 04/09 750C, 755C, and 770C.
Comments, thoughts?

 

[adiggs]

Yesterday and today sold 04/09 750C, 755C, and 770C.
Comments, thoughts?

I think more importantly - what was your thinking as you sold those options? Why that expiration - why those strikes?

 

[Tslynk67]

Yesterday and today sold 04/09 750C, 755C, and 770C.
Comments, thoughts?

Could be toast if P&D surprises on the upside, same for me with the 4/30 800's, but I'm OK selling 1000 shares at that price

 

[Criscmt]

I think more importantly - what was your thinking as you sold those options? Why that expiration - why those strikes?

• A key criteria, I would rather take loss than let my stocks taken away and ITM options closed out (sold against stock and ITM LEAPS I have). This influences my strike and expiry on the options sold.
• I thought 30% gain in 2 weeks from this Monday open is of low probability given the macro climate.
• 2 weeks out to give me enough time to roll, one week might not give enough room to buy out or roll
• I have margin, if P&D disappoints hugely and stock reacts very negatively I wanted at least a small cushion added to the margin through this sale.

Could be toast if P&D surprises on the upside, same for me with the 4/30 800's, but I'm OK selling 1000 shares at that price

When I sold the options, the street estimates were >170K, which for me seem high. That said, apparently, now street estimates came down to 162K per Gary Black. So that factor is not against me.

 

[Criscmt]

• A key criteria, I would rather take loss than let my stocks taken away and ITM options closed out (sold against stock and ITM LEAPS I have). This influences my strike and expiry on the options sold.
• I thought 30% gain in 2 weeks from this Monday open is of low probability given the macro climate.
• 2 weeks out to give me enough time to roll, one week might not give enough room to buy out or roll
• I have margin, if P&D disappoints hugely and stock reacts very negatively I wanted at least a small cushion added to the margin through this sale.

When I sold the options, the street estimates were >170K, which for me seem high. That said, apparently, now street estimates came down to 162K per Gary Black. So that factor is not against me.

So that factor is not now against me