TSLA Trading Strategies

[ggr]

J20 would imply January. If not January, people would likely write it as Jun20.

And anyway, only Jan LEAPS are available way in advance... although June 20 are available now.

 

[neroden]

IV is important for choosing the time when to roll.
During high IV period, the price of the nearer term options accelerates faster than the price of the later term options.

Ah, so you're saying you want to roll long calls or puts during high IV, and roll short calls or puts during low IV?

That maks sense to me... sort of...

 

[shlokavica22]

Ah, so you're saying you want to roll long calls or puts during high IV, and roll short calls or puts during low IV?

That maks sense to me... sort of...

Correct. However, options far from the current stock price are less impacted from IV movement. I guess you have a platform allowing you to see and compare IV for individual options?

Btw, in the market thread you mentioned you sell puts. Did you look into Risk Reversal strategy?
Selling puts makes the most of Theta, but the delta moves slower and the Max profit is capped, whilst the tied margin is high.
With RIsk Reversal you get less risk, lower margin, uncapped Max profit. Theta/IV is less of a factor and delta is the king- the more the stock moves up, the more gain you get.

 

[EVNow]

Ah, so you're saying you want to roll long calls or puts during high IV, and roll short calls or puts during low IV?

But if you are rolling shorter calls to longer calls - how would that work ?

SP ofcourse makes so much of a difference than IV. So, I guess, it is tempting to sell the calls when the SP is high and buy when it goes lower. For eg. I was thinking I'll sell the call after 2 or 3 days of raising SP and buy when inevitably the SP goes down a bit. Obviously there is some risk there.

J'20 C400
Yesterday - SP 325, IV 51.39%, Ask 47.15

Today - SP 346, IV 51.05%, Ask 56.30 (+19%)

J'19 C400
Yesterday - SP 325, IV 48.53%, Ask 4.95
Today - SP 346, IV 46.30%, Ask 7.75 (+56%)​

 

[neroden]

Correct. However, options far from the current stock price are less impacted from IV movement. I guess you have a platform allowing you to see and compare IV for individual options?

Btw, in the market thread you mentioned you sell puts. Did you look into Risk Reversal strategy?

Yes. Tax consequences in the US for my after-tax account can be a mess. I've been avoiding the various nasty tax gotchas which come from synthetic stock and from collars.

Selling puts makes the most of Theta, but the delta moves slower and the Max profit is capped, whilst the tied margin is high.

Since I only use margin for put selling (I'm allergic to paying interest) and I have tons and tons of margin capacity, I haven't found that a problem.

With RIsk Reversal you get less risk, lower margin, uncapped Max profit. Theta/IV is less of a factor and delta is the king- the more the stock moves up, the more gain you get.

I've already got a very large amount of Tesla stock outright, which gives me a fine result when the stock moves up. Probably as large a position as I really should have. What I've been doing with the puts is also making money when the stock *doesn't* move up, by maximizing my harvesting of theta. And if the stock really dips low occasionally I get some stock cheap when I probably should increase my position.

So it works for me.

 

[neroden]

But if you are rolling shorter calls to longer calls - how would that work ?

No, no, not short duration -- short calls. I mean if you're writing covered calls and want to roll them.

 

[Cherry Wine]

Can anyone help me understand why short-term IV dropped so much on TSLA options this morning? Is it because of the G20 summit having ended with no other foreseeable unknowns within the month of Dec, or is it related to price action? Thank you!

 

[neroden]

My personal crazy theory is that market makers are net long in TSLA options rather than the usual net short in options, and are getting wise to those of us who have been selling options at high IV -- that the market makers are crushing IV to avoid losing money. No way to tell though And honestly this theory does seem sort of unlikely.

 

[Cherry Wine]

My personal crazy theory is that market makers are net long in TSLA options rather than the usual net short in options, and are getting wise to those of us who have been selling options at high IV -- that the market makers are crushing IV to avoid losing money. No way to tell though And honestly this theory does seem sort of unlikely.

I literally was going to start selling weeklies today, lol.

 

[elasalle]

My personal crazy theory is that market makers are net long in TSLA options rather than the usual net short in options, and are getting wise to those of us who have been selling options at high IV -- that the market makers are crushing IV to avoid losing money. No way to tell though And honestly this theory does seem sort of unlikely.

Does VIX factor into market sentiment and hence IV? Just today VIX is down 9.19%

 

[Cherry Wine]

Does VIX factor into market sentiment and hence IV? Just today VIX is down 9.19%

Interesting theory. Another one I read is that Wednesday's market closure might be dropping IV.

 

[EVNow]

Can anyone help me understand why short-term IV dropped so much on TSLA options this morning? Is it because of the G20 summit having ended with no other foreseeable unknowns within the month of Dec, or is it related to price action? Thank you!

My observation is that when SP drops, IV goes up. When SP shoots up, IV drops.

It makes sense. When SP drop, what do you expect ? You would think that SP will go up, so people are more willing to buy calls. But when SP is high and the call prices are high - people start wondering what the upside potential really is - and are less willing to buy calls.

 

[neroden]

Put IV's dropped too, though. ( I mean, it's still way high compared to normal stocks.)

 

[Cherry Wine]

Both VIX and IV were up today, I noticed. My decision to sell covered calls on Monday has not been good to me thus far. Oops.

 

[Cherry Wine]

Both VIX and IV were up today, I noticed. My decision to sell covered calls on Monday has not been good to me thus far. Oops.

By today's close, the weeklies I had sold on Monday were worth only $0.20 less. Wow! Thankfully I was able to buy them back during this morning's short-lived dip at a better price than that. The big jump in IV later this week, and the difference in the underlying between when I sold the calls (~$358) and where the stock has ended up today counteracted the theta decay much more than I anticipated.

Still have much to learn.

 

[farzan]

check Michael Jenkins tradingcollection here :

https://ebookfee.com/product-tag/michael-jenkins/