Wiki Selling TSLA Options - Be the House

[ninpb]

Anyone buying LEAPs if we drop into the $800s? ITM/OTM? Expiry? We're cash limited so looking at a March'22 play that banks on a run upward towards Q4 earnings/product announcements in late January. Scared to trade if this isn't the bottom though - don't really see any upside catalysts between now and 12/31. Otherwise, may just buy 5 to 10 shares and call it a day/year.

Bought a 1/19/24 900C at 895. Holding the other half in case a bigger dip from now until January.

 

[BornToFly]

I really think this week will come down to Omicron news. 5/12 vaccinated college kids (including my son) at Wednesday night Survivor viewing "party" in Los Angeles now sick with Covid. So very contagious even among vaccinated and boosted. If older adults don't end up in the hospital, then we should be ok. If it starts to look worse, watch out below. So far, I refuse to pull the rip cord on my 12/23 750/950s. I might roll to 12/31 and widen the spread to 700/950.

 

[BornToFly]

Also if Elon sells tomorrow, I fear we break through 900.

 

[mongo]

Also if Elon sells tomorrow, I fear we break through 900.

You mean again? Already happened today.

 

[BornToFly]

You mean again? Already happened today.

We barely dipped and recovered. I mean a real drop below 900.

 

[bkp_duke]

I think I'm going to go take the dogs for a walk.

Absolutely crappy market today all around.

 

[corduroy]

Anyone buying LEAPs if we drop into the $800s? ITM/OTM? Expiry? We're cash limited so looking at a March'22 play that banks on a run upward towards Q4 earnings/product announcements in late January. Scared to trade if this isn't the bottom though - don't really see any upside catalysts between now and 12/31. Otherwise, may just buy 5 to 10 shares and call it a day/year.

I bought last week. Turns out I was early, but I think it will come back around.

One not advice idea if you are in a cash limited account and want to catch some of upside of a LEAP is vertical call debit spreads. For example Jan 2024 +800/-1100. Instead of the $36,000 cost of that $800 call, the spread cost is $9,100. Your upside is of course capped, but the ROR is good, 227% in this example. You could also possibly buy back the short leg sometime and be left with just the LEAP. It's a cheaper way to add deltas vs buying shares (in this example +13 deltas vs 9ish if you bought shares)

 

[OrthoSurg]

I think I'm going to go take the dogs for a walk.

Absolutely crappy market today all around.

I was lucky enough to be working like crazy the last 2 weeks and couldn’t follow that crappy market. I sell puts 20% OTM 1-2 weeks expiry when the stock price drops more than 3%, when I have couple minutes to do so. That’s about it.

 

[Cherry Wine]

I really think this week will come down to Omicron news. 5/12 vaccinated college kids (including my son) at Wednesday night Survivor viewing "party" in Los Angeles now sick with Covid. So very contagious even among vaccinated and boosted. If older adults don't end up in the hospital, then we should be ok. If it starts to look worse, watch out below. So far, I refuse to pull the rip cord on my 12/23 750/950s. I might roll to 12/31 and widen the spread to 700/950.

I watch COVID data very closely (in fact, I loaded up on 12/23 $900 puts on Friday afternoon because I saw a tidal wave of bad COVID news coming over the weekend). Unfortunately, interpretation of hospitalization data is sort of a "choose your own adventure" at the moment. Data out of South Africa are encouraging, but how do they translate to other countries such as UK, etc.? The key metric to watch in the coming days will be hospitalization data out of London. The latest report this morning does show early signs of a lower hospitalization rate relative to Delta, though that could be due to a lag effect since it spreads so quickly. Still too early to tell.

Personally, I'm of the opinion that hospitalization rates as a percentage of cases will be lower than those of Delta. Not necessarily because the variant leads to a more mild form of disease (though early indications are that it infects cells in the bronchus more effectively, and cells in the lungs less effectively, which really could mean relatively fewer patients in ICUs/ventilators), but because the individuals that it infects will by and large be those with some immunity from vaccination, prior infection, etc. Whether that relatively lower rate translates to a lower absolute number, since the number of cases will be so huge, I have no idea. I'm definitely keeping my ear to the ground, though, and I do think we will see a lot of cases over the next few months. With two young kids in school, I'd say odds of my family being among them are pretty high...

 

[Discoducky]

We barely dipped and recovered. I mean a real drop below 900.

This is the move I'm waiting for to sell a few more puts and to buy some $1k jan24 LEAPs for fun.

 

[adiggs]

Pretty happy how Friday and today has gone. Friday I closed out some 650/850 put spreads for ~55%. Today I've opened replacement 650/830s for 3.30ish for this week expiration. The 650/830 because I like the 830 strike better than 850 and the 650 insurance because it was that or 600 - that's down in the range where strikes are every $50. So a $180 spread that I am otherwise treating like a $200 wide spread.

This put spread sequence has acted as reinforcement for my preference for early closes. I think the driver for what was good here was going into the weekend with the 650/850 with 12/23 expiry position closed. I got my 1/2 realized gain and got to sit out the weekend.


Along these lines the 1000 strike calls for this week had also reached a 55% profit level late in the day on Friday and I didn't close those. Not because I didn't want to but because I didn't notice until after the close of business. If I had noticed then I'd have closed the calls on Friday as well. It works out for me in this circumstance as I was able to close at ~90% profit this morning instead of 55% profit on Friday, but the larger notion of taking a reasonably high fraction gain off the table going into the weekend still seems like a good one (for me at least).

I very much want to open replacement calls for this week but I'd be selling calls into weakness if I opened right now. So I'll wait and hope for a move up later today or this week, and open then.

 

[LightngMcQueen]

I was lucky enough to be working like crazy the last 2 weeks and couldn’t follow that crappy market. I sell puts 20% OTM 1-2 weeks expiry when the stock price drops more than 3%, when I have couple minutes to do so. That’s about it.

I have been lurking here for a while trying to understand rationale behind different strategies, and thats the most sound, evidence based method I seen in a while.

3% move would typically translate into elevated IV so it is good shorthand signal IMO.

Garry Black uses symmetrical strategy to sell weekly CC at 10+% OTM (which would translate to 15% OTM for 2weeks) targeting realized yearly return of ~10%.

 

[GeoX750]

I was lucky enough to be working like crazy the last 2 weeks and couldn’t follow that crappy market. I sell puts 20% OTM 1-2 weeks expiry when the stock price drops more than 3%, when I have couple minutes to do so. That’s about it.

Your rationale is when TSLA drops 3%, you can get better premiums and/or a lower strike price, and your view is that TSLA share price will recover ?

What about selling covered calls on TSLA drop days, like today? I sell covered calls, mainly just for weekly expiration, but missed trading on Friday with holiday activities. Now, its Monday and this is a short week, but would still like to sell some CCs.

Is there a consensus to avoid selling covered calls on TSLA market drops ?

 

[st_lopes]

Clipped 1170cc and lccs at 80% gains this morning. Also clipped 1150/1200 at 80% gains this morning.

Not bad for 2 days of price action. Now we wait to re-enter CC/LCC/BCS for next week. Will sell the new batch on strength or will take whatever premium is available (at strikes 1150-1200) as of Wednesday PM.

Remaining position for this week 830/780 BPS.

I'm of the view we're at or nearing the bottom. RSI is flashing heavily oversold. Omicron fears are getting overblown, but it will take a few news cycles to pivot to what matters (hospitalization and death rates). VIX is coming down from the danger zone as well. QQQs are hovering at 20MA on weekly chart, would need a definitive break below 380 (on weekly chart) to signal the bull market coming to an end.

 

[st_lopes]

Your rationale is when TSLA drops 3%, you can get better premiums and/or a lower strike price, and your view is that TSLA share price will recover ?

What about selling covered calls on TSLA drop days, like today? I sell covered calls, mainly just for weekly expiration, but missed trading on Friday with holiday activities. Now, its Monday and this is a short week, but would still like to sell some CCs.

Is there a consensus to avoid selling covered calls on TSLA market drops ?

Generally try to aim for selling in to strength. It's very easy to get caught in an intra-week volatility whipsaw.

 

[adiggs]

Your rationale is when TSLA drops 3%, you can get better premiums and/or a lower strike price, and your view is that TSLA share price will recover ?

What about selling covered calls on TSLA drop days, like today? I sell covered calls, mainly just for weekly expiration, but missed trading on Friday with holiday activities. Now, its Monday and this is a short week, but would still like to sell some CCs.

Is there a consensus to avoid selling covered calls on TSLA market drops ?

NOT-ADVICE
The general idea here, using covered calls as our example, is to sell (open) on strength (shares up) and buy (close) on weakness (shares down). The rationale is that most likely the open strike will be normalized to some personal definition of risk so the higher the share price on open then the higher the strike price for a given risk level. The premium will be about the same most likely but the higher strike price will be less likely to be reached than a lower strike price.


A specific example with some semi-made up numbers. When the shares opened this morning at $930 and then traded down to $900. If you had opened new covered calls when the shares were $930, you might have opened the $1000 strike calls. Those would be $70 OTM at that point (assuming this week expiry) and priced somewhere around $3. That same strike ($1000) is closer to $1.40 right now. If you'd opened when the shares were $900 each and you'd normalized your risk to be $70 OTM then you'd still get $3(ish) credit but now you're opening the $970 strike instead of the $1000 strike.

The numbers are semi-made up to show the concept and be directionally accurate, rather than describe a specific circumstance that is available right now.

By opening into relative strength ($930 share price on open, vs. $900 right now) you end up with a $30 better (higher) strike on the call and that much more room to be right and earn that premium.


The other reason this is desirable is that a move in one direction is frequently matched up with a move in the other direction. If that happens in this situation then that 970 strike is more likely to be reached than the 1000 strike. That's not a guarantee of course (a move up being paired up with this move down - like everything it works until it doesn't) but even if the shares took off in the above example and move above $1000, you're still in a $30 better strike and have that much smaller of a loss to take or manage.

The tricky bit is figuring strength and weakness. A first order approximation is to open covered calls on a green day and close them on a red day.

 

[Tslynk67]

I've been thinking on how to work this situation to some advantage... one idea that came into my tiny mind, just a moment ago, would be to sell weekly straddles. So, for example, this week, c&p900's, seems to be the area of attention, maximum Theta for each, on of them will always win, roll the lot to the next ATM point the week after

With 25 each of puts and calls, this would bring in $100k per week, roll the lot, up or down to the next week - neutralises the SP movements somewhat

Trying to fathom whether this is madness or genius...?

Edit: thinking a bit more, one doesn't even need to write ATM, one could skew the strike somewhat in one direction - like this week, which is a bit on the bearish side, f.i. write both at 875 strike, nets $11 for the puts, $36 for the calls

Of course this thing could flip on its head at any moment and throw one side DITM, but again, at least you got some mitigation from the other side of the trade

 

[JustMe]

Day trading spreads

I did well, picking ~$900 as a support/low for the day.

I mostly traded 820p/750p expiring 12/23. In and out four times throughout the day. Sold at what I thought was a local low and sell for 10-20% profit within 1-2 hours.

First trade was 1 minute after market open, net $3.93, sold at $3.40 ten minutes later.

After opening a position, I track the spread price, stock price, and time of day. Doing this allows me to watch theta decay or IV change in real time. Even if the stock price is moving against the position, theta decay on a weekly option is often fast enough to compensate. This is something I evaluate carefully during the day.

I want to close these out by the end of the day to avoid gaps up/down after hours like we’ve experienced so much this month

I have found that the most profitable spreads to day trade are 1-2 weeks out because of the higher premiums, but <1 week options are better for times like this when the stock is so unpredictable. Theta decay helps to rescue positions that are headed to trouble.

I make good profits doing this when I remain dispassionate, not greedy, and not stupid. I am working hard to rescue spreads that I am holding from mistakes I made during stupid sloppy greed a couple of weeks ago. Profit from trading 5-10 spreads at a time today was $2300.

Let me know if this is too far off topic for this thread.

 

[OrthoSurg]

Your rationale is when TSLA drops 3%, you can get better premiums and/or a lower strike price, and your view is that TSLA share price will recover ?

What about selling covered calls on TSLA drop days, like today? I sell covered calls, mainly just for weekly expiration, but missed trading on Friday with holiday activities. Now, its Monday and this is a short week, but would still like to sell some CCs.

Is there a consensus to avoid selling covered calls on TSLA market drops ?

Puts gain value when the market drops from spiking IV and I feel we are getting closer to a bottom. There will be a recovery some day and it might be a +10% day. Someday Regression to the mean might do something for us. And naked puts are easy to roll till the stock recovers because a +50% annual growth stock always recover.

I do not feel safe to sell CCs within 30% OTM at these prices because I remember the stock recovering 11% in one day last year when it reached its low around $570. If the stock goes up 8% in one day I will be happy to sell 20% OTM CCs expiring within 1 week. I learned over my few options trading months that selling into strength is infinitely More satisfying than selling into weakness and just waiting for Theta to do its job.
I live to sell Puts when they stock goes down, IV spiked and I put a STO a bit further out than the Ask/Bid to sell into the day dip and then I live to see the IV go down, stock price recover a bit and Theta working for me.

 

[juanmedina]

I closed some $1100 CC's that I sold for $2 on Friday for $0.24 and the leftover of my Herz CC's are worth nothing . I find myself with more shares than ever and I am hoping for a Q4 blow out.