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$13.75 divided by $86.25 of your own cash to secure the position=~16% return, divide by ~2 years=8% return per year. If I'm going to invest in TSLA I don't want 8% return per year, even if the risk is pretty low. If Elon dies or an earthquake destroys Fremont and sends the stock under $100, 8% isn't worth it to me. If I'm bent on writing Jan 19 puts cash secured I would go up to at least $120 or $140 strike and get a lot better return rate for more or less the same risk.Anyone else tempted to write Jan19 100 puts (or similar)? They are fetching a premium of 13.75 which means that TSLA would need to be below $86.25 in more than 2 years to lose money.
Like @neroden, I would only do this cash secured.
The option doesn't need to be in the money to be green from a buyer and subject to exercise. The J19 $240's I bought for about $30k are worth about $36k today, in about 3 weeks.Anyone else tempted to write Jan19 100 puts (or similar)? They are fetching a premium of 13.75 which means that TSLA would need to be below $86.25 in more than 2 years to lose money.
Like @neroden, I would only do this cash secured.
The option doesn't need to be in the money to be green from a buyer and subject to exercise. The J19 $240's I bought for about $30k are worth about $36k today, in about 3 weeks.
I didn't mean exercise, I meant sell to close. And if I sold my $240 calls and you got picked to buy them they are definitely out of the money and I'd make about $6k. Who's going to lose the $6k?I understand that @MitchJi, if TSLA heads lower in short order the option value will certainly increase. I am not sure what your point is here exactly. I doubt someone would exercise it if it was not in the money, and even if they did do that, l would come out a winner.
I think you're misunderstanding something, but I'm not quite sure what. If the option buyer chooses to exercise the option, someone will get a surprise. But "sell to close" is just like trading a stock, someone else must agree to buy, and a price gets negotiated the usual way on the exchange. No one gets assigned anything.I didn't mean exercise, I meant sell to close. And if I sold my $240 calls and you got picked to buy them they are definitely out of the money and I'd make about $6k. Who's going to lose the $6k?
I think you're misunderstanding something, but I'm not quite sure what. If the option buyer chooses to exercise the option, someone will get a surprise. But "sell to close" is just like trading a stock, someone else must agree to buy, and a price gets negotiated the usual way on the exchange. No one gets assigned anything.
I've been using this:Thanks @Johathon Hewitt and @neroden for your words of wisdom. This is exactly what I was looking for, thoughts and considerations, not specific buying or selling advice. I've been trading options for about 3 years now (infrequently) and have had the most success writing call options, and buying LEAPs.
Getting a potential 8% annualized return on cash secured TSLA long term puts doesn't sound so attractive relative to simply putting that money into an index fund does it.
I will admit I have not paid attention to IV. Can either of you point me to where I can find this value and provide a context for what is considered historically low or high?
I like Stock Options Analysis and Trading Tools on I Volatility.com for the chart you can make, like this:I will admit I have not paid attention to IV. Can either of you point me to where I can find this value and provide a context for what is considered historically low or high?
I've decided to do a partial hedge of my long positions by shorting 0.10 delta calls at opportune times with 45-60 days expiration. I could be more aggressive with my hedging but you never know when TSLA is going to shoot up on news. A 0.10 delta call has a ~90% chance of ending up out of the money so if I close them out and roll them before expiration that should raise the percentage chance of expiring even more. In the rare chance they end up in the money I should have made a killing on my long positions as a .10 delta call is pretty out there. They don't bring in a ton of cash themselves but should help me buy more TSLA while we wait for some real price appreciation.Well my new strategy is to sell 5% OTM weekly puts every week. If the stock drops I'll either roll them forward or close it out and re-open once the stock has settled somewhat. From the math doing this on margin is about 3% / week return so you only need 24 weeks of successful trades to have a 100% gain. This means that it allows for half of the weeks to delay the trade to the next week (i.e. roll forward 1 week to a lower strike, same $ value). Selling short term puts is where you gain all of the loss of time value of the option contract, but doing it just 5% OTM of course carries risk and one needs to monitor the trades all the time and make sure not to be overleveraged as a 10-15% drop overnight on news like SCTY acquisition can easily put you deep in the red. But making an annual growth of 20+% should be relatively straightforward, but requires some discipline
Haven't seen that. I'd like to see the animations if you do it.
Based on a Vega of 14.5 per spread and if we get a Volatility increase of ~15% then the value of the spread should have an increase of ~$2.18, just for the volatility increase! This is a 37% profit off of an entry of $5.82. We also have theta decay going on, currently helping us about $3 a day.Neroden, I decided to follow your buy March 200 calls and sell jan 20 200s. Thank you for your contributions. Given todays movement, any updated thoughts on the trade?
Based on a Vega of 14.5 per spread and if we get a Volatility increase of ~15% then the value of the spread should have an increase of ~$2.18, just for the volatility increase! This is a 37% profit off of an entry of $5.82. We also have theta decay going on, currently helping us about $3 a day.
While a volatility increase and theta decay will help our profits, any move away from the strike price ($200 in this case) will lower the value of the spread. Based on current conditions I see a breakeven in-between $186 and $216 but a volatility increase will widen the range.
I can almost guarantee volatility will increase (at least 10% I would think) and I can promise 100% time will pass but I can't help much on where the strike price will be between now and January. Depending on how risk averse you are you could close and take the profits you have right now (~10%) or hold out for a little bit as we have a good amount of time. This is a trade that can go to 0 and not good to risk a lot of capital on. I am holding out for at least 30% profits and up to ~100% but will monitor the share price and volatility as time goes on. For example, if the share price gets away from us (up or down) and we are getting closer to expiration I am more likely to just close for break-even.
Just for the record, I did not advise you to do that. I do not give investment advice here. And I didn't make this trade and would not make this trade. The only calls I own are for Jan 2019 expiration.Neroden, I decided to follow your buy March 200 calls and sell jan 20 200s. Thank you for your contributions. Given todays movement, any updated thoughts on the trade?
Just for the record, I did not advise you to do that. I do not give investment advice here. And I didn't make this trade and would not make this trade. The only calls I own are for Jan 2019 expiration.
I hope you understood this but your wording was unclear.