Wiki Selling TSLA Options - Be the House

[st_lopes]

Quoted from main thread, Elon is all done for 10b5! What a great news!

Now to find out if I’ve got some managing to do on my 1130 cc, or on my 1150 and 1250 BCS!

 

[Cattledog]

Now to find out if I’ve got some managing to do on my 1130 cc, or on my 1150 and 1250 BCS!

Well, I'd venture yes, yes, and depends on the expiration date, but likely yes. Free adrenaline time!

 

[st_lopes]

Well, I'd venture yes, yes, and depends on the expiration date, but likely yes. Free adrenaline time!

I’m not as sold on the idea we just rip from here. I actually suspect it’s mostly priced in already given that sales had to conclude by tomorrow for it to be settled in 2021. But we shall see!

 

[Discoducky]

Great advice! Wonder where it came from?

Barchart: 2 Option Trade Ideas For TSLA This Week.

2 Option Trade Ideas For TSLA This Week

Tesla (TSLA) posted impressive gains last week and is up 17.30% in the last five trading days. That compares to just 3.78% for the S&P 500. The following options plays give different ways to play the stock depending on an investor’s risk/reward preferences.

www.barchart.com

 

[Flehmenlips]

If one were super bullish on $TSLA and had $300k cash to invest, and had a margin trading account with level 2 privileges. How about this trade as of todays prices:

BTO 2700 shares $TSLA @ $1090 = $2,940,000
BTO 39 June 22 1100 puts @ 190.45 = $742,755 (protective puts)
Cash Margin requirement through TDA with risk adjusted portfolio margin = $297,000

In this scenario, all shares are tied up with protective puts, so no ability to sell covered calls, but it does give leverage of 2700 shares, vs. 550 shares at straight 50% cash margin share purchase based on $300k cash. (And then there is the pesky reality of needing to purchase more protective puts in June 2022 if necessary...)

Thoughts?

As I think about, I am considering this trade in contrast to purchasing Jan 2024 $2475 LEAPS at $161.90, which would be 18 LEAPS for $291,420, and would allow the selling of covered calls.

 

[BornToFly]

Ok, I've taken my next educational step. Freed up a few dollars for my first BPS. This post by UltradoomY got me looking at January 21, which feels to me like a great learning experience.

Dipping my toes in the water with one Jan 21 -$1050 / +900 BPS for $37.

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.

 

[Oil4AsphaultOnly]

If one were super bullish on $TSLA and had $300k cash to invest, and had a margin trading account with level 2 privileges. How about this trade as of todays prices:

BTO 2700 shares $TSLA @ $1090 = $2,940,000
BTO 39 June 22 1100 puts @ 190.45 = $742,755 (protective puts)
Cash Margin requirement through TDA with risk adjusted portfolio margin = $297,000

In this scenario, all shares are tied up with protective puts, so no ability to sell covered calls, but it does give leverage of 2700 shares, vs. 550 shares at straight 50% cash margin share purchase based on $300k cash. (And then there is the pesky reality of needing to purchase more protective puts in June 2022 if necessary...)

Thoughts?

As I think about, I am considering this trade in contrast to purchasing Jan 2024 $2475 LEAPS at $161.90, which would be 18 LEAPS for $291,420, and would allow the selling of covered calls.

Doesn't these trades start accruing margin loan interest immediately? With $300k cash, if the stock prices don't go anywhere for awhile, wouldn't your cash position get eaten away by the margin interest? Sorry, but I've only been selling options on margin and just trying to wrap my head around how your trade would work?

Edit: Just to clarify, from what I've read, you're trying to buy $2.94M of equities AND $743k of put options with only $300k of cash (and whatever margin has been extended to you). And that just strikes me as SUPER RISKY. I'm just trying to make sure I understood your question correctly?

 

[Tslynk67]

Mainly bc I haven’t taken the course on page 1 and know only a little about it.
But since seeing this comment, I’ll do some reading. Thx. (Nothings free btw, but since I think SP will rise, and it won’t hurt if wrong…)

So what’s a safe price, like no way it goes below___ ? lower Bollinger Band? Weekly or deeper or leap? By “against it”, you mean keep my existing Option and sell it or use the banks and Open to Sell?

For a newbie, it’s more complicated than it looks. I’m not even certain I’m qualified with TD. But I’m also a curious person

You’re all like my old drug friends, lol. Now I know why my brother lost it all twice now.

It’s strange on TD. My “Margin avail” is around -50k, same as cash, which is the main reason I stopped buying chairs all in today. Before the close Margin was jumping around -20-27k. It appeared as though they were just stating what I’d need if it expired? Maybe the change has to do with Open Vs Closed market?

For some reason, I don't find your previous posts, but as I understand it, you hold a bought call, right, was a Jan 21 c850, or something like that, which is currently negative value - these are currently priced around $245, most of which is extrinsic

Let's say the call cost you $350, meaning you need the SP to get above $1200 by the 21st to get your money back. You can sit it out and hope that happens, or you could sell a Jan 21 c1200 against it for $29, meaning you get $2900 back, whatever happens, or maybe more profitable, sell a weekly c1200 against it for 31/12, 7/1, 14/1 & 21/1 - by doing that you can adapt the strike upward if the SP takes off with the P&D

This is essentially the same as selling a call against 100 shares

 

[Right_Said_Fred]

If one were super bullish on $TSLA and had $300k cash to invest, and had a margin trading account with level 2 privileges. How about this trade as of todays prices:

BTO 2700 shares $TSLA @ $1090 = $2,940,000
BTO 39 June 22 1100 puts @ 190.45 = $742,755 (protective puts)
Cash Margin requirement through TDA with risk adjusted portfolio margin = $297,000

In this scenario, all shares are tied up with protective puts, so no ability to sell covered calls, but it does give leverage of 2700 shares, vs. 550 shares at straight 50% cash margin share purchase based on $300k cash. (And then there is the pesky reality of needing to purchase more protective puts in June 2022 if necessary...)

Thoughts?

As I think about, I am considering this trade in contrast to purchasing Jan 2024 $2475 LEAPS at $161.90, which would be 18 LEAPS for $291,420, and would allow the selling of covered calls.

I don't get it. Am I missing something? Why do you buy 39 protective puts for 2700 shares? Wouldn't 27 suffice? And why do you not have the ability to sell covered calls against those shares?

And what if we expire below or at $1090 in June? You will have lost $700k of the $740k you paid for the puts.

Plus there's the elephant in the room: it's incredibly risky to invest $3.7 million on $300k margin. That sounds like a recipe for disaster. If your broker changes the margin requirements you are toast.

 

[UltradoomY]

Great advice! Wonder where it came from?

Barchart: 2 Option Trade Ideas For TSLA This Week.

2 Option Trade Ideas For TSLA This Week

Tesla (TSLA) posted impressive gains last week and is up 17.30% in the last five trading days. That compares to just 3.78% for the S&P 500. The following options plays give different ways to play the stock depending on an investor’s risk/reward preferences.

www.barchart.com

lol, I wish I would have read that site before - now added to standard reading material.
My trade of 1080/880 for the 21st was purely out of my own research/looking at chicken bones/drinking whiskey and chart watching.
Still might not turn out well but glad to have some outside sources to confirm and I like my $200 wide spread as a buffer better than their $60 spread.
Thanks for the additional data point as always @Discoducky

 

[BrownOuttaSpec]

Picked up some BPS 1/7 800/900 @ $2.05 at the end of the day drop. I told myself i was going to sit out until the new year but I can't let you guys have all the fun

I picked up a couple more @ $2.80 around the 10:15am dip.

 

[Flehmenlips]

I don't get it. Am I missing something? Why do you buy 39 protective puts for 2700 shares? Wouldn't 27 suffice? And why do you not have the ability to sell covered calls against those shares?

Right, I don't understand the 39 vs. 27 protective puts. I was playing around with the "understand margin" tab in my account and playing around with the boundaries to develop a better understanding. This was the mix that kept the cash position under $300k cash. I am not sure about the covered call situation, I assumed that if the shares were tied up with married puts that would not be allowed, but I guess I don't know why not.

And what if we expire below or at $1090 in June? You will have lost $700k of the $740k you paid for the puts.

Plus there's the elephant in the room: it's incredibly risky to invest $3.7 million on $300k margin. That sounds like a recipe for disaster. If your broker changes the margin requirements you are toast.

Yes. This is very true. Thanks for the feedback. I would not do this, but I am curious to understand better the power of married puts to create more margin leverage. It sort of blows my mind that you could leverage this hard. I guess I am always looking at the limits and boundaries, a dangerous exercise...

 

[Knightshade]

FWIW on the dip today I rolled the -1000/+900 12/31 BPSes I had in cash account to -995/+895 1/7s on the dip for $9.12 added credit

Also opened same in IRA for $11.28 net credit (as new positions, leaving the same # of -1000/900 12/31s open)

Plan currently is to let the 12/31s expire worthless and close the 1/7s in both accounts early next week, in the "run" part of P&D rather than the profit taking part, but we'll see.

Given all of above are manageable-without-a-loss down to roughly 950, and I don't see a >$100/sh drop happening between now and post-P&D this feels pretty reasonable for the return even if it's rather near ITM than I'd usually want.

 

[Flehmenlips]

I don't get it. Am I missing something? Why do you buy 39 protective puts for 2700 shares? Wouldn't 27 suffice? And why do you not have the ability to sell covered calls against those shares?

And what if we expire below or at $1090 in June? You will have lost $700k of the $740k you paid for the puts.

Plus there's the elephant in the room: it's incredibly risky to invest $3.7 million on $300k margin. That sounds like a recipe for disaster. If your broker changes the margin requirements you are toast.

Here is another scenario:

$300,000 cash
BTO +1000 shares $TSLA @ 1080 = -$1,080,000
BTO +10 p900 17 JUN 22 @ 93.50 = -$93,500
STO -10 c1400 17 JUN 22 @ 85.00 = +$85,000
Margin required: about $270,000

 

[OrthoSurg]

Here is another scenario:

$300,000 cash
BTO +1000 shares $TSLA @ 1080 = -$1,080,000
BTO +10 p900 17 JUN 22 @ 93.50 = -$93,500
STO -10 c1400 17 JUN 22 @ 85.00 = +$85,000
Margin required: about $270,000

These are excellent scenarios to risk it all in the goal of becoming a Teslanaire. You might have 80% probability of success but 20% probability of losing it all in case of a recall, FSD ban from Biden administration or whatever unexpected thing that could tank the SP for 6-12 months. Selling OTM Puts or BPS might give less return over leverage but have higher probability of success. Some positions are salvageable when you have extra margin to roll them and others end a total loss. Be safe out there.

went with 20x -p945 7/1 at 10:20. Love the MMD.

 

[st_lopes]

Here is another scenario:

$300,000 cash
BTO +1000 shares $TSLA @ 1080 = -$1,080,000
BTO +10 p900 17 JUN 22 @ 93.50 = -$93,500
STO -10 c1400 17 JUN 22 @ 85.00 = +$85,000
Margin required: about $270,000

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

 

[wooter]

My dec31 1250/1390 and dec31 945/810 and jan07 890/870's all looked green today and closed my positions with about 90% profit (I should keep a spreadsheet to really establish how good or bad it is) and set up a new jan07 1045/870. It's maybe a bit close to ITM, but after Elon's done selling I don't see it dropping lower than 1050 in a meaningful way by the end of next week.

 

[ChefBoyardee]

Here is another scenario:

$300,000 cash
BTO +1000 shares $TSLA @ 1080 = -$1,080,000
BTO +10 p900 17 JUN 22 @ 93.50 = -$93,500
STO -10 c1400 17 JUN 22 @ 85.00 = +$85,000
Margin required: about $270,000

Alternatively, you could buy 10 900/1400 call spreads which would be a similar result.

If you're super bullish, something like 1200/2400 call spreads for Jan 2024 gives you more time to be right
- $288,000 entry cost
- 1400 ish breakeven
- $1,500,000 max return

But what I would do is use 100k for shares, 100k for OTM leaps call spreads, and 100k in cash for weekly put spread selling. Shares are the anchor, put selling outperforms if the stock doesn't rise very quickly, and the OTM leaps outperform if the stock has a big up move

 

[Drezil]

Here is another scenario:

$300,000 cash
BTO +1000 shares $TSLA @ 1080 = -$1,080,000
BTO +10 p900 17 JUN 22 @ 93.50 = -$93,500
STO -10 c1400 17 JUN 22 @ 85.00 = +$85,000
Margin required: about $270,000

/me cries in portfolio-margin:

 

[UltradoomY]

/me cries in portfolio-margin:

View attachment 749586

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?