Wiki Selling TSLA Options - Be the House

[Oil4AsphaultOnly]

Max loss 188,500
Breakeven at 1088.50
Max gain 312,500
Carrying cost (assume 2% margin rate) 1,300/month

Essentially a margined straddle

You will need to keep rolling the straddle indefinitely to maintain the position or hopefully be able to enter a custom order to STC the shares and puts while simultaneously BTC the covered calls. If you can only enter the close orders one at a time you will end up margin called immediately

TDAmeritrade's margin rate is almost 10% for new margin accounts, so wouldn't flehmenlips's carrying costs by 5x at $7500/month?

 

[Flehmenlips]

TDAmeritrade's margin rate is almost 10% for new margin accounts, so wouldn't flehmenlips's carrying costs by 5x at $7500/month?

My current margin rate in TDA is 3.85% for $500k-$1M. I should probably negotiate a lower rate.

 

[Drezil]

That's a Collar with Equity - I show max profit at $24k per contract for holding through expiration and having shares called away.
Am I missing something?

300k more cash would shrink the margin-requirements to "just" 415k i have to bring up in other equities..
The thing i clicked in there is exactly what was given as "idea".

Calculations for Portfolio-Margin are WAY different from RegT-Margin and Margin-Loans ..

I had RegT-Margin with IB-UK until Brexit. Switching to Portfolio-Margin with IB-Ireland cost me about 75% of my buying power....

 

[Tslynk67]

Those are great positions and I wish I had your nerves of steel. With my minimal cash, I’m more comfortable pushing out a week or two. So, today I rolled some CCs & CSPs out to form a farther out straddle:
BTC 1/07 c1030s at $71.50 STO 1/14 c1050s at $72.00
BTC 1/07 p1060s at $32.40 STO 1/14 p1050s at $41.00
Ideally, I’d prefer 1100s or higher, but still not enough cash to back the puts. Collected about $9cr, less than 1%/wk and not the best timing, but helps this newbie sleep better. Will feel more confident once I build back some trading cash. Still hoping to recover those Sep22 -c1300s that I had to sell to get out of a bad position. A couple $$$ per week gets me there tortoise-style.

Best advice ever.

Are you looking for an IV crush on that 1050 straddle?

I played that for Q3 and it would have worked out great if I had closed both sides of the position immediately, but the call code ran off into the distance and injured quite some losses

 

[Drezil]

just STO 10x 1075/1085 1105/1115 IC for fun.
Max-Profit: 7400, max-loss 2600.

Lets see if the MM can hit it tomorrow

 

[Tslynk67]

just STO 10x 1075/1085 1105/1115 IC for fun.
Max-Profit: 7400, max-loss 2600.

Lets see if the MM can hit it tomorrow

A bit cautious on the put side of the trade...

 

[WattsHappening]

Well, that is a really aggressive first step with a lot of time for the SP to drop on you. I do think we will be above 1050 before the ER, but that doesn't leave much room for error if something unexpected happens. Make sure you have an exit plan. If the SP drops, will you buy to close at $50? $74? You won't be able to roll without a debit once the SP gets around 975. Max loss is $15,000-3,700.

Edit: Very different from a 1050 naked Put. The SP could drop to 800 with a Put and you won't worry in the slightest. You can always roll a naked Put a month out, with a week to go to avoid assignment, for more premium even with the SP at 800. But if the SP drops to 800 with a 1050/900 spread, you are at max loss with few options. If it drops to 950 with two weeks to go, what's the plan? You can't treat a BPS like a Put unless you are really, really wide.

Thanks for this @BornToFly; I appreciate your insights, particularly about thinking through my plan if the SP starts to drop.

I didn't consider this to be really aggressive, but it's probably due to my mindset of selling covered calls slightly OOM and then rolling when appropriate (I've been pretty successful rolling CCs).

I have high confidence that the SP will be higher than $1,050 in January. But I recognize and accept that the SP is irrational short term and I could lose up to $11,300 on this trade. I do need to better understand the dynamics of rolling BPSs (your comment about not treating BPS like a Put hits home). One of my goals with this trade is to monitor my options (pardon the pun) to roll over the next three weeks.

I understand I could have used lower strike prices or a wider range to reduce risk. But I'm ok with the risk. It will be fun to monitor this trade.

 

[ReddyLeaf]

Are you looking for an IV crush on that 1050 straddle?

I played that for Q3 and it would have worked out great if I had closed both sides of the position immediately, but the call code ran off into the distance and injured quite some losses

Yes, definitely hoping for an IV crush. This is another trade where I’m trying to save a stupid trade. I would really like to be better at timing my trades. My call buys have been atrocious since January, CCs since October. The puts have been ok, but still recovering from the Elon slide. I’m usually just reactive or selling too early. The only thing that seems to work is selling strangles or straddles (probably because I can’t get the SP direction wrong). Oh well, 2022 goals include better entry points. If I ever get back to 100% shares I will definitely be more judicious selling CCs.

 

[juanmedina]

I sold some BPS 970/920 for a 11% return and some 970/870 for a 7% return for 01/07. I want to see how differently they behave to SP changes.

 

[Knightshade]

Question for folks who hold DITM LEAPs.... seems like I recall folks typically roll out further as they get into the last year of the option...

I've got a bunch about to be in that situation ($550 Jan 2023s for example)... Looks like just adding another year of time would run roughly $50/share right now... an amount that ought be reasonably easy to cover selling OTM calls against em... that the way to go?

Or are there reasons to consider changing my strike as SP has moved up fair bit from when I originally got em? Or for waiting nearer to original expiration?

 

[st_lopes]

TDAmeritrade's margin rate is almost 10% for new margin accounts, so wouldn't flehmenlips's carrying costs by 5x at $7500/month?

IBKR is <2%, my brokerage is at 4.5% and I haven’t bothered to argue it lower since I very rarely actually use the margin to purchase positions, just to sell them, which doesn’t cost me any interest.

Clipped my 1250/1300 BCS at 80%

Still riding 1130 CC and 1150/1200 BCS

Opened 900/850 BPS 1/7, which are already sitting at 30%

 

[UltradoomY]

Question for folks who hold DITM LEAPs.... seems like I recall folks typically roll out further as they get into the last year of the option...

I've got a bunch about to be in that situation ($550 Jan 2023s for example)... Looks like just adding another year of time would run roughly $50/share right now... an amount that ought be reasonably easy to cover selling OTM calls against em... that the way to go?

Or are there reasons to consider changing my strike as SP has moved up fair bit from when I originally got em? Or for waiting nearer to original expiration?

Lot's of different ways to play it - the straight roll for $50 is probably the second easiest.
First would be to sell them and find something else you really like or just hold them longer.

The leaps still have a ton of time value in them even up to 6 months out - check the chart to see what I mean.
July 22' - $550 call is $540
January 23' $550 - $580 (yours)
July 23' $550 is $600

So not a ton of time value between two of them but much more from one to the last.
So you could keep them till roughly June and sell more LCC's against them or roll them anytime.

My not advice would depend on when you bought them and if it is a taxable account.
Taxable account - I would wait to do anything until they are long term and then roll to the next year out.
Non-tax account - do it now and go up to around $750-$800 and get more of them, since they will be just as good for LCC's now.
Cheers

 

[Drezil]

A bit cautious on the put side of the trade...

ye. i always underestimate their power to push things down -.-

 

[WattsHappening]

Question for folks who hold DITM LEAPs.... seems like I recall folks typically roll out further as they get into the last year of the option...

I've got a bunch about to be in that situation ($550 Jan 2023s for example)... Looks like just adding another year of time would run roughly $50/share right now... an amount that ought be reasonably easy to cover selling OTM calls against em... that the way to go?

Or are there reasons to consider changing my strike as SP has moved up fair bit from when I originally got em? Or for waiting nearer to original expiration?

I'm interested in this question as well. I took the opportunity during the summer to leverage some shares into DITM LEAPs (patting myself on the back). Several in the $300-$500 range expiring Jan 2023 and Mar 2023. These are all in non-taxable accounts.

My current thinking is to just wait until we get close to expiration, then de-leverage by selling enough to exercise as many of these into shares as possible. But I am open to other options as well. Probably not looking to further increase leverage, at least for now. I'll wait patiently for the inevitable sell-off before considering it.

Question about writing CCs against these LEAPs: would you write a call with the same exercise date at a higher price (basically creating a BCS)? Or can you write calls with shorter expirations? Examples of this would be greatly appreciated. And a related noob question: what does the acronym LCC stand for?

 

[MikeC]

I'm interested in this question as well. I took the opportunity during the summer to leverage some shares into DITM LEAPs (patting myself on the back). Several in the $300-$500 range expiring Jan 2023 and Mar 2023. These are all in non-taxable accounts.

My current thinking is to just wait until we get close to expiration, then de-leverage by selling enough to exercise as many of these into shares as possible. But I am open to other options as well. Probably not looking to further increase leverage, at least for now. I'll wait patiently for the inevitable sell-off before considering it.

Question about writing CCs against these LEAPs: would you write a call with the same exercise date at a higher price (basically creating a BCS)? Or can you write calls with shorter expirations? Examples of this would be greatly appreciated. And a related noob question: what does the acronym LCC stand for?

You can sell any call with a same or higher strike and same or sooner expiration.

Re: your DITM calls, I try to sell mine on a big green day with spike in price and IV, and then deleverage by buying back into shares. No need to burn off any remaining extrinsic value waiting until the expiration date if you know you want to convert back to shares anyway.

LCC = LEAPS-covered call

 

[Right_Said_Fred]

Today we had another tax discussion clogging up this thread. That it contained incorrect information and bickering made it worse. From now on, tax discussions can take place in the dedicated thread Tax implications of option selling (I hijacked a recently started thread about Canadian taxes on option selling, renamed it and moved 12 posts there).

 

[WattsHappening]

You can sell any call with a same or higher strike and same or sooner expiration.

Re: your DITM calls, I try to sell mine on a big green day with spike in price and IV, and then deleverage by buying back into shares. No need to burn off any remaining extrinsic value waiting until the expiration date if you know you want to convert back to shares anyway.

LCC = LEAPS-covered call

Thanks; very helpful.

So if I have a $500 Jan 2023 LEAP, I can write say a $1,500 April 2022 CC for the premium. And the logic is that if the SP is >$1,500 by April 2022 and my short call gets exercised, that is covered by me being able to exercise my $500 call. Ok, that makes perfect sense. Since it doesn't tie up any cash, I can see a pretty safe play would be to write DOTM calls against these LEAPs. Obviously not a ton of premium if I am being very conservative, but still..... I'll watch to see if I can time some writes on big days. Who knows, I may be able to collect enough safe premiums to exercise one of my $300 LEAPs when the time comes.

I'm already pretty much fully invested in shares and LEAPs, so I can't exercise and buy into shares 1 for 1.

Thanks again!

 

[Oil4AsphaultOnly]

Today we had another tax discussion clogging up this thread. That it contained incorrect information and bickering made it worse. From now on, tax discussions can take place in the dedicated thread Tax implications of option selling (I hijacked a recently started thread about Canadian taxes on option selling, renamed it and moved 12 posts there).

Sorry! But on the plus side, we did resolve it ourselves.

 

[OrthoSurg]

Today we had another tax discussion clogging up this thread. That it contained incorrect information and bickering made it worse. From now on, tax discussions can take place in the dedicated thread Tax implications of option selling (I hijacked a recently started thread about Canadian taxes on option selling, renamed it and moved 12 posts there).

You are more than welcome to clog my Noob option questions thread, my tax Implication thread and my political discussion thread that I purposely created to avoid wasting too much time in this thread screening for the relevant posts when I‘m limited to 5-10 minutes here during come busy days. When they have already been prescreened and sent there, surfing this thread with 100% option trades posts shared by others is like a useful Xmas gift compared to the main investors thread.

on another note, sold some covered calls on the last green days from last week, sold some puts during the dips. All my positions are already between +50% to 80% for this week and next week. This feels really great compared to the last week I had to pull the trigger to manage covered calls. I love it when it becomes close ITM on the way up because my main position is going up too but I love it even more when the week ends right in the middle of my strangles.

I was wondering how much of their margin everyone is allocating to selling options? Do you keep 50% or your margin available? If selling BPS or puts 30% OTM, do you leave less margin available? I was wondering what was the reasonable number here since the general strategy here is with bigger contracts than the 1–5% allocations advised by option alpha with a 70% success rate. I was wondering if à general rule had already been previously discussed?

 

[st_lopes]

You are more than welcome to clog my Noob option questions thread, my tax Implication thread and my political discussion thread that I purposely created to avoid wasting too much time in this thread screening for the relevant posts when I‘m limited to 5-10 minutes here during come busy days. When they have already been prescreened and sent there, surfing this thread with 100% option trades posts shared by others is like a useful Xmas gift compared to the main investors thread.

on another note, sold some covered calls on the last green days from last week, sold some puts during the dips. All my positions are already between +50% to 80% for this week and next week. This feels really great compared to the last week I had to pull the trigger to manage covered calls. I love it when it becomes close ITM on the way up because my main position is going up too but I love it even more when the week ends right in the middle of my strangles.

I was wondering how much of their margin everyone is allocating to selling options? Do you keep 50% or your margin available? If selling BPS or puts 30% OTM, do you leave less margin available? I was wondering what was the reasonable number here since the general strategy here is with bigger contracts than the 1–5% allocations advised by option alpha with a 70% success rate. I was wondering if à general rule had already been previously discussed?

Rather than leave a specific percentage of margin of available, I instead calculate how much buying power I would lose if Tesla were to pull back 30%. I then ensure I have enough margin left to cover that kind of a draw down.

I guess a rule of three would say that’s about 15% of margin left as a cushion.