Wiki Selling TSLA Options - Be the House

[wooter]

There's still 12/31 tomorrow - could be a FOMO last day before the delivery numbers.

I've been promised that FOMO action for weeks now.

And truth is: Tesla buys on the rumour, and sells on the news. And the rumours are already out.

Obviously I can be wrong. I might take some profits after a dip.

 

[MikeC]

I've been promised that FOMO action for weeks now.

And truth is: Tesla buys on the rumour, and sells on the news. And the rumours are already out.

Obviously I can be wrong. I might take some profits after a dip.

Well, we did go from under 900 to over 1100 in the past week or so.

And what is the rumor that is out for delivery numbers? If anything, expectations are lower than usual because of the Elon email ending the wave. Plus, we're going to get some China numbers tomorrow AM.

 

[adiggs]

So I looked at this... rolling my Jan 23 $550s to Jan 24 $750s for example nets me about $55 a share credit... plus "saving" me the ~53/share cost of rolling to Jan 24 550.... so I net about $108 a share, for a $200/share strike bump, compared to rolling a year out on the same strike, though only about half that is "new" cash

So in theory for say every 10 of these one rolled they could get 11 of the 750s a year further out at about even cost.... though somewhere in my brain taking $108 for a $200 strike increase DITM seems...not great?


Ran some examples through options calc trying to get my brain working...

Running this through the options calculator, and looking where I'd be when I was once again about a year from expiration (so Jan 2023) and looking at a few stock prices, I get:

Pay ~$53 share to keep the 550 strike out another year, keep it at 10 contracts:
Stock at $1100 I lose ~$47,500 total (about 100k including the 53k I had to add)
Stock at $1300 I make about $158,000 total (about 105k including costs)
Stock at $1500 I make about $320,000 total (267k w/costs)
Stock at $1800 I make about $640,000 total (587k w/costs)


Or roll it 11 Jan 2024 $750s:
Stock at $1100 I lose ~$85,000
Stock at $1300 I make about $100,000
Stock at $1500 I make about $300,000
Stock at $1800 I make about $610,000

Plus in theory I make some non-zero amount on selling 1 extra CC.


But I think adding the 53k to my losses isn't accurate math...because a roll isn't really a roll it's a sell and buy- so I should only care about what I paid for the buy....

In which case the $550s seem to win at every price I tested even with there being one less of them... since I'm probably not gonna make 20k in a year selling one extra CC and at most SPs the gap is even bigger than 20k.



Or am I thinking about this all wrong?

I think this is exactly the sort of analysis that needs doing to help make a quality decision. I only consider these sorts of early rolls when the DITM options I own have gotten really, really DITM.

An important driver in my own consideration is that time value / month consideration. I also largely ignore the gains or losses due to the change in the option value as my focus is the income from selling covered calls. I have a different focus and objective - this is also why I look to change the positions on a big move -down-. I want the new position to have as much opportunity to be making money, which further reduces my ability to get a useful level of profit out of the position.

I've been promised that FOMO action for weeks now.

And truth is: Tesla buys on the rumour, and sells on the news. And the rumours are already out.

Obviously I can be wrong. I might take some profits after a dip.

This is something I've been thinking about. When the general view of things becomes particularly fevered and all in one direction (with TSLA and these parts, that is always upwards), I've found that is frequently a contrarian indicator. My hypothesis is, I think, similar to yours. With everybody expecting a big move up, we all go positions ourselves to take advantage of that big move up. Leaving nobody to do the buying that is necessary for that big move up

I'm still positioned for a big move up - just something that I think about as well.

The share price only goes up with new buyers that are ready and willing to buy the shares at increasingly higher prices. We don't just need buyers today around $1100 - we need buyers in a few weeks at $1200, $1300, ...

 

[wooter]

I completely agree.

But also got spooked.

Closed the -1110c/+1190c with half of the premium in my pocket.

I wondered earlier what day trading calls and puts meant. Now I know.

 

[Tslynk67]

Well, we did go from under 900 to over 1100 in the past week or so.

And what is the rumor that is out for delivery numbers? If anything, expectations are lower than usual because of the Elon email ending the wave. Plus, we're going to get some China numbers tomorrow AM.

Broadly, street is saying 265k, Tesla folks 285k

 

[EVCollies]

At MMD 910 I rolled my 12/31 BPS -p900/+p700 to 1/7 same strikes @ 8.9.

Rolled those 1/7 BPS -p900/+p700 to 1/14 -p920/720 @5.2 this morning. Was very tempting to choose -p950 but @Yoona has tamed my greed.

My first trade in almost two weeks, I feel so lame watching everyone else, but it is getting me where I need to be. My last trade this year and my best month thanks to all your non-advice. After nine months of trading I have almost doubled the cash harvested from selling 20% of my TSLA.

Here is my month summary, BPSR=BPS roll.

Date	Expires	Trade	Strike	Spread	SP	Delta	Proceeds
12/6	12/17	BPSR	920	200	960	0.25	$500
12/10	12/23	BPSR	910	200	1,000	0.21	$568
12/14	12/31	BPSR	900	200	955	0.30	$590
12/17	1/7	BPSR	900	200	910	0.30	$800
12/30	1/14	BPSR	920	200	1,077	0.11	$520

 

[Right_Said_Fred]

With the last trading day of the year coming up and after having enjoyed a good run - $730k gain since April - I've decided to dial down the risk a bit in the new year. At 1090 I rolled 20 p1025 1/7 down to p960. I still have 5 p1025 left, but will let those expire if possible.

Last week those puts went 140 points ITM and that felt too uncomfortable. In the new year I'm going to go with positions that are more OTM. I will also take some money off the table - move $500k to my retirement account - and continue with 20 instead of 25 positions.

I know my timing probably isn't great. And I know I'm losing the chance to profit from the compounding effect of putting everything, including gains, on the line every time, but I need to be less greedy and take less risk. And I expect to still be earning plenty of premium.

 

[Flehmenlips]

With the last trading day of the year coming up and after having enjoyed a good run - $730k gain since April - I've decided to dial down the risk a bit in the new year. At 1090 I rolled 20 p1025 1/7 down to p960. I still have 5 p1025 left, but will let those expire if possible.

Last week those puts went 140 points ITM and that felt too uncomfortable. In the new year I'm going to go with positions that are more OTM. I will also take some money off the table - move $500k to my retirement account - and continue with 20 instead of 25 positions.

I know my timing probably isn't great. And I know I'm losing the chance to profit from the compounding effect of putting everything, including gains, on the line every time, but I need to be less greedy and take less risk. And I expect to still be making enough.

Seems like a sensible choice. Out of curiosity, what was your initial investment that allowed you to generate $730k in 8 months? And is that $730k of premium income/profits?

 

[Right_Said_Fred]

Seems like a sensible choice. Out of curiosity, what was your initial investment that allowed you to generate $730k in 8 months? And is that $730k of premium income/profits?

I've been using this trading account for pure option selling since June 2020. I've had several 'runs' since then. The last run, from early April, started out with $1.1 mln in cash. So the profit has been 66% in almost 9 months. That is from premiums received.

And I get to keep most of it. We (still) have this great tax system in The Netherlands in which stock and trading profits are not taxed. They assume a fictitious return of about 5%, on which you pay 30% tax. This equates to 1.5% tax per year. This method sucks when the stocks in your portfolio have dropped in value or when you get very little or even negative interest on your savings account, but it is a gift for option traders with high profits. It was set up with simplicity in mind, but there are now political plans to switch to a system in which the actual return is taxed. I can't blame them.

 

[scubastevo80]

i opened 1/7 BPS -p950/+p850 this morning, credit 4.19

We traded a bunch this week after the screw up and ended up on slightly down on the week. This morning we waited too long and ended up trading the 1/7 -950/+880 at $2.85. Left some cash to see how tomorrow goes.

 

[LightngMcQueen]

I've been using this trading account for pure option selling since June 2020. I've had several 'runs' since then. The last run, from early April, started out with $1.1 mln in cash. So the profit has been 66% in almost 9 months. That is from premiums received.

Thank you for sharing that. Given your option trading experience it makes for a good benchmark to compare against.

I am assuming that you focus on TSLA options. SP is up around 50% in this timeframe so you have generated respectable 16% of "outperformance".

It would be interesting to know how consistent your monthly returns/ account balances were, compared to relatively bumpy SP performance over this year.

 

[ReddyLeaf]

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.

Well, so much for tortoise-style. BTC 1/14 c1050s at $62.xx, while leaving the p1050s alone, which are still near the same as I sold them yesterday. Nearly $10/sr profit off a day’s sitting (better than some weeks). I was most worried about the calls anyway, happy to be out, and will wait for a real SP spike to STO. I still have CCs in the other accounts, but management of those can be delayed (Sept22 -c1300s).

Edit: @OrthoSurg

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’m 100% IRAs, no margin allowed. Trying to keep 10% cash available for buyback/rolls, but it’s not always possible. Currently, about 70:20:10 p:c:$$$ in one account and 45:45:10 in another. Since the puts are fully cash-secured, technically I’m almost all cash. Unfortunately, also no cashless rolls or spreads in my brokerage.

 

[M3Rider]

A bit of weakness at EOD. Feels like buying is drying up in front of p&d and that 285k deliveries is sorta priced in.
Not sure I agree with Gary that PMs were waiting for end of Elons sales. Doesn’t make sense to me they’d want to buy at higher price after lower price was available.
Feels to me like there won’t be a big jump after p&d. After ER - maybe.

 

[Tslynk67]

With the last trading day of the year coming up and after having enjoyed a good run - $730k gain since April - I've decided to dial down the risk a bit in the new year. At 1090 I rolled 20 p1025 1/7 down to p960. I still have 5 p1025 left, but will let those expire if possible.

Last week those puts went 140 points ITM and that felt too uncomfortable. In the new year I'm going to go with positions that are more OTM. I will also take some money off the table - move $500k to my retirement account - and continue with 20 instead of 25 positions.

I know my timing probably isn't great. And I know I'm losing the chance to profit from the compounding effect of putting everything, including gains, on the line every time, but I need to be less greedy and take less risk. And I expect to still be earning plenty of premium.

Smart move, methinks... I'm also dialling-down the leverage and exposure, it's great when it goes well, but when it goes bad, the stress is way too much

I'm at the stage where capital preservation is takes precedence over growth

Would still like 1% per week if possible, and like the rest of us, always thinking of how to achieve this with the least risk and stress - I guess if it were that easy, everyone would be doing it!

My 20x Jan 24 c900 LEAPS, which have around $900k capital sunk into them bother me. I really worry for the macro environment (Elon's Tweeting that he thinks there will be a recession next year not helping much), and some kind of persistent pull-back, killing the value of those contracts... I'm thinking to sell aggressive calls against them, like March 1200's, so claw back a decent chunk of the premium, while still making a profit if the short side goes ITM... meh!

Of course a good P&D beat and a 10% rise on Monday would soothe the nerves, but the manipulators have been in total control, so I don't know what from here

 

[Right_Said_Fred]

Thank you for sharing that. Given your option trading experience it makes for a good benchmark to compare against.

I am assuming that you focus on TSLA options. SP is up around 50% in this timeframe so you have generated respectable 16% of "outperformance".

It would be interesting to know how consistent your monthly returns/ account balances were, compared to relatively bumpy SP performance over this year.

I only sell TSLA options. Premiums are great - an advantage of the volatility of the stock - and it's nice to only have to focus on one stock. It's also a stock that has a high potential to recover from slumps because of the company's growth.

The returns were not consistent, 60% of the gain was achieved during the last three months. There are several reasons for this:

- Premiums have been higher during the last few months
- I've switched from monthly options to weekly options at the end of October (very happy with that, so I will stick with those)
- Because of the compounding effect I could open more positions

I also have shares, which I just hodl and do not use them for option selling, and not even for margin. I could have used the cash to buy extra shares and make a 50% return, but selling options is much more fun as it gives you a sense of control. It feels like you are less at the mercy of the vagaries of the market, the manipulations and the FUD, if you can keep them OTM. And it's just wonderful that the market makers (plus the odd put buyer) are handing me loads of money every week, and then to see those premiums melt away through time decay.

 

[Tslynk67]

I only sell TSLA options. Premiums are great - an advantage of the volatility of the stock - and it's nice to only have to focus on one stock. It's also a stock that has a high potential to recover from slumps because of the company's growth.

The returns were not consistent, 60% of the gain was achieved during the last three months. There are several reasons for this:

- Premiums have been higher during the last few months
- I've switched from monthly options to weekly options at the end of October (very happy with that, so I will stick with those)
- Because of the compounding effect I could open more positions

I also have shares, which I just hodl and do not use for option selling, and not even for margin. I could have used the cash to buy extra shares and make a 50% return, but selling options is much more fun as it gives you a sense of control. It feels like you are less at the mercy of the vagaries of the market, the manipulations and the FUD, if you can them OTM. And it's just wonderful that the market makers (plus the odd put buyer) are handing me loads of money every week, and then to see those premiums melt away through time decay.

So you're only selling puts, right? Not holding any calls/LEAPS to sell against?

The amazing China domestic sales for December gives me quite some optimism for P&D, I'm going to hold-off any aggressive call selling today and wait until Monday (unless the stock shoots way up, which I doubt, Hedgies gonna defend $1100 with their mothers' lives)

 

[juanmedina]

I've been using this trading account for pure option selling since June 2020. I've had several 'runs' since then. The last run, from early April, started out with $1.1 mln in cash. So the profit has been 66% in almost 9 months. That is from premiums received.

And I get to keep most of it. We (still) have this great tax system in The Netherlands in which stock and trading profits are not taxed. They assume a fictitious return of about 5%, on which you pay 30% tax. This equates to 1.5% tax per year. This method sucks when the stocks in your portfolio have dropped in value or when you get very little or even negative interest on your savings account, but it is a gift for option traders with high profits. It was set up with simplicity in mind, but there are now political plans to switch to a system in which the actual return is taxed. I can't blame them.

Are you doing spreads or just puts? on my wife's 401k rollover that she did on 07/21 I am up 57%. I was actually thinking the opposite about using more cash to sell premium and getting more aggressive .

 

[BornToFly]

Sold 800/1000 for Jan 7. Saving the remaining 50% of my contracts until Monday when I see what the market does. They are $6 more than 950s, so I figure I can roll down for a $6 debit on Monday and still break even with just selling 750/950s right now if the SP drops on Monday. But if the SP climbs, then the 1,000s give me a lot more money for the week.

 

[BrownOuttaSpec]

Sold 800/1000 for Jan 7. Saving the remaining 50% of my contracts until Monday when I see what the market does. They are $6 more than 950s, so I figure I can roll down for a $6 debit on Monday and still break even with just selling 750/950s right now if the SP drops on Monday. But if the SP climbs, then the 1,000s give me a lot more money for the week.

I like the strategy. Too aggressive for me but it makes a lot of sense (and $).

 

[Right_Said_Fred]

So you're only selling puts, right? Not holding any calls/LEAPS to sell against?

The amazing China domestic sales for December gives me quite some optimism for P&D, I'm going to hold-off any aggressive call selling today and wait until Monday (unless the stock shoots way up, which I doubt, Hedgies gonna defend $1100 with their mothers' lives)

Mostly selling naked puts, but occasionaly also naked calls - far OTM - when I see attractive premiums and not much upside to the stock within a week. I'm not afraid to sell naked calls, as I'm convinced I can roll them up if necessary.

But like you I definitely want to wait selling calls for next week because of the P&D numbers coming up. And just like you I'm seeing macro uncertainties increase in the coming months (Russia-Ukraine, inflation, interest rates).

Are you doing spreads or just puts? on my wife's 401k rollover that she did on 07/21 I am up 57%. I was actually thinking the opposite about using more cash to sell premium and getting more aggressive .

That's a pretty good return with your wife's account. Happy wife, happy life

Good luck with the more agressive strategy (not meant as sarcasm!). I started being more agressive a few months ago and it paid off. Now I'm giving that other emotion - fear/concern - a bigger role, but it isn't necessarily a better emotion to base trading strategies on.