Advanced TSLA Options Trading

[Jayjs20]

Where did I say I was surprised? It's weird and it's unsettling, yes, but it's not surprising.

I'm just looking for some reassurance that nothing is flying over my head.

Speaking of which:

Yes, you should receive the premiums from selling the options once they expire. So you are experiencing real losses with every position opened and sold for a loss; but as long as the premiums on the last strangle you sell are larger than your total losses, you'll end up black.

Thanks.

No other snippy, condescending comment is necessary. Have a great day.

 

[azaz]

debating buying some jan 31 ~$800 calls

 

[ClownMouth]

hey guys/all. I've used options before but not in the context that I'm considering here and could use some advise. I want to increase my position but don't have the cash for the 300 - 500 additional shares I'd like to own/control. So I've been looking into LEAPS as stock replacement - not in terms of replacing the shares I already own, but to add more without the full cash outlay up front. I'm not looking to get overly risky and gamble on far OTM strikes, I really just wish I owned 300 - 500 additional shares. Is my best bet in this case to buy ATM LEAPS for as far out (time-wise) as possible and then periodically roll them forward? And if so, will this give me roughly dollar-for-dollar participation in upside (I understand there is intrinsic value and time value, and the time value decreases as we get closer to expiry). I really appreciate any help here.

 

[ZenMan]

So you want the exposure of 300 additional shares:
Buy shares outright: 300* $570 = $171,000
Buy (March 19, 2021) $570 strike = $4,600
These have a Delta of around .54. So if you want a 1:1 ratio dollar movement you'd need almost 6 Leaps.
6 Leaps at $4,600 = $27,600

Now that you have dollar parity watch the Bollinger Bands, whenever TSLA exceeds the Upper band, sell 6 Calls at the next highest strike. (For example yesterday, TSLA went about $20 above the bollinger band. If you used this methodology, you would have sold 6 600 Calls that expire that week (tomorrow) at $8 each). You could have reduced your basis by $4,800. Repeat repeatedly.

 

[Cherry Wine]

So you want the exposure of 300 additional shares:
Buy shares outright: 300* $570 = $171,000
Buy (March 19, 2021) $570 strike = $4,600
These have a Delta of around .54. So if you want a 1:1 ratio dollar movement you'd need almost 6 Leaps.
6 Leaps at $4,600 = $27,600

Now that you have dollar parity watch the Bollinger Bands, whenever TSLA exceeds the Upper band, sell 6 Calls at the next highest strike. (For example yesterday, TSLA went about $20 above the bollinger band. If you used this methodology, you would have sold 6 600 Calls that expire that week (tomorrow) at $8 each). You could have reduced your basis by $4,800. Repeat repeatedly.

3/19/21 $570 calls at $4,600? I'm not seeing that price at all. I would be all over that! I'm seeing those trading at ~$11,500.

 

[ClownMouth]

So you want the exposure of 300 additional shares:
Buy shares outright: 300* $570 = $171,000
Buy (March 19, 2021) $570 strike = $4,600
These have a Delta of around .54. So if you want a 1:1 ratio dollar movement you'd need almost 6 Leaps.
6 Leaps at $4,600 = $27,600

Now that you have dollar parity watch the Bollinger Bands, whenever TSLA exceeds the Upper band, sell 6 Calls at the next highest strike. (For example yesterday, TSLA went about $20 above the bollinger band. If you used this methodology, you would have sold 6 600 Calls that expire that week (tomorrow) at $8 each). You could have reduced your basis by $4,800. Repeat repeatedly.

Thanks for the reply. Am I looking at the options chain wrong, though? - Mar '21 $570 strike looks like they are about $11,500 not $4,600.

 

[ZenMan]

Thanks for the reply. Am I looking at the options chain wrong, though? - Mar '21 $570 strike looks like they are about $11,500 not $4,600.

Sorry since it was after market close the options pricing tool I was using pulled some wrong data....

 

[ggr]

In any case the volatility is high before earnings, if you intend to buy LEAPS, you may as well wait until after the earnings call.

 

[Boomer19]

personally i would not be looking to sell puts right now, especially 550p
sure you get 3500 per contract, but if it goes to 500 your 50k cash balance is now tied up collateralizing your underwater put


the strangle thing, if you’re losing money repeatedly, change strategy. better yet, simplify. long call or put, don’t go crazy. or covered positions. or lock in a spread and be done with the trade if it hits.

...

i get why @Hock1 and @ggr and others feel this way. they (and i) have watched people get clocks cleaned and not know what hit em.

i play w derivatives. they are kinda my bread and butter, so i know how they work. BUT, i don’t get crazy on strategies.

for anyone, it may be best to just keep it simple. bet with your head, not over it.

i don’t know where the price is going, only that it’s moving at high velocity as we are at these levels. i have stock. also 0 short term options at this point. only DITM jan21, jun21 that i bought in 200s (and hope to exercise) and OTM jun22 that i rotated into as i took off my march 20s (sold those too early $100 ago - but that’s the point!!! you never know)

as a general rule, i am not afraid to take profit on a derivatives trade. they move like lightning. it’s a bit easier to say and stomach this when you have LT stock holdings. you’re never going to win every battle with derivatives. but with stock you can win the war.

don’t feel pressure to get into deriv bc of FOMO. the stock is just fine, and has the ability to give you your multiples if you give it time, as @DaveT and others have pointed out.

 

[DaveT]

Best time to pick TSLA LEAPs up is when stock price and sentiment around company is very depressed, but core company mission/trajectory is still in tact.

 

[mongo]

Question for ya'll. Given the high IV of options at the moment, if one had a DITM call in the Feb timeframe and 100 shares (so a sold call would be covered two ways) would it be a reasonable thing to set up a bull call spread? (sell a call today for an off the money strike expiring at or before the call they already have)?

It limits upside profit depending how much earnings bounce things, but offsets the IV drop. Could even close the sold call early to free upside potential.

Thanks!

 

[mrwuffles]

Question for ya'll. Given the high IV of options at the moment, if one had a DITM call in the Feb timeframe and 100 shares (so a sold call would be covered two ways) would it be a reasonable thing to set up a bull call spread? (sell a call today for an off the money strike expiring at or before the call they already have)?

It limits upside profit depending how much earnings bounce things, but offsets the IV drop. Could even close the sold call early to free upside potential.

Thanks!

I'm far from an expert, but the IV crush would be worse on the long option than the short, wouldn't it? Further limiting upside potential.

 

[mrwuffles]

personally i would not be looking to sell puts right now, especially 550p
sure you get 3500 per contract, but if it goes to 500 your 50k cash balance is now tied up collateralizing your underwater put


the strangle thing, if you’re losing money repeatedly, change strategy. better yet, simplify. long call or put, don’t go crazy. or covered positions. or lock in a spread and be done with the trade if it hits.

...

i get why @Hock1 and @ggr and others feel this way. they (and i) have watched people get clocks cleaned and not know what hit em.

i play w derivatives. they are kinda my bread and butter, so i know how they work. BUT, i don’t get crazy on strategies.

for anyone, it may be best to just keep it simple. bet with your head, not over it.

i don’t know where the price is going, only that it’s moving at high velocity as we are at these levels. i have stock. also 0 short term options at this point. only DITM jan21, jun21 that i bought in 200s (and hope to exercise) and OTM jun22 that i rotated into as i took off my march 20s (sold those too early $100 ago - but that’s the point!!! you never know)

as a general rule, i am not afraid to take profit on a derivatives trade. they move like lightning. it’s a bit easier to say and stomach this when you have LT stock holdings. you’re never going to win every battle with derivatives. but with stock you can win the war.

don’t feel pressure to get into deriv bc of FOMO. the stock is just fine, and has the ability to give you your multiples if you give it time, as @DaveT and others have pointed out.

It sounds like you don't let capital gains interfere with your strategy, is that true? My biggest blind spot right now is incorporating whether to realize gains and roll out my calls with the fact I'd be in short term. I suppose 10% be 30% isn't a huge difference, but it hurts to know that much will come off.

specifics: I have DITM calls ($420 Jan 21 expiry I bought at SP $300). Basis is $43, currently at $199 with 0.83 delta. I like how closely tied I am to SP for upside, but have been around long enough to know that we could see several quarters of a dip or sideways depending on how guidance affects analyst sentiment. I'd like to roll them out to Jul 21 or later, and also use the proceeds to move up to $650+, possibly after ER and vol crush make options cheaper. Not sure if I should sell and switch to shares (I can use margin to double my position for only 5% borrow).

If I didn't have to worry about taxes, I'd sell right now, switch to shares on margin,
and after ER roll to OTM Jul 21 or later.

Wanted to get your or others opinions.

 

[mrwuffles]

I'm far from an expert, but the IV crush would be worse on the long option than the short, wouldn't it? Further limiting upside potential.

Pretty sure I'm wrong but can't edit. Looking at option chain, Vega is higher on the short call for a bull call spread.

 

[mongo]

Pretty sure I'm wrong but can't edit. Looking at option chain, Vega is higher on the short call for a bull call spread.

Right, I expect the OTM short call to lose a lot of value overnight. Idea is to benefit from the high IV that it would sell for. Tough trade off of price vs strike through...

 

[Boomer19]

It sounds like you don't let capital gains interfere with your strategy, is that true? My biggest blind spot right now is incorporating whether to realize gains and roll out my calls with the fact I'd be in short term. I suppose 10% be 30% isn't a huge difference, but it hurts to know that much will come off.

specifics: I have DITM calls ($420 Jan 21 expiry I bought at SP $300). Basis is $43, currently at $199 with 0.83 delta. I like how closely tied I am to SP for upside, but have been around long enough to know that we could see several quarters of a dip or sideways depending on how guidance affects analyst sentiment. I'd like to roll them out to Jul 21 or later, and also use the proceeds to move up to $650+, possibly after ER and vol crush make options cheaper. Not sure if I should sell and switch to shares (I can use margin to double my position for only 5% borrow).

If I didn't have to worry about taxes, I'd sell right now, switch to shares on margin,
and after ER roll to OTM Jul 21 or later.

Wanted to get your or others opinions.

sorry didn’t get to this in time.

as the gauge moves from low risk to high risk (stock vs term options of 1+ yr) i try not to let tax implications get in the way, if a situation is critical enough.

 

[UnknownSoldier]

I've yeeted my way to substantial success on 3/20 and 4/17 510, 540, and 600 calls, but I really wonder if I should be taking profits and rolling them forward or just holding them for awhile and seeing what happens. With expirations 2-3 months out, I feel like I could chill with them awhile and see, or I could seriously consider exercising the 510's and 540's and turning them into shares. Any insights would be helpful on the decision-making process to determine whether it's better to sell calls that are deep ITM or exercise? Also, what do people think about holding these calls versus rolling them forward, especially considering the possible timing of battery day? Thanks to anyone who replies.

 

[MFranc123]

Any insights would be helpful on the decision-making process to determine whether it's better to sell calls that are deep ITM or exercise?

I'm definitely not an option expert, I'm replying to this only because I haven't seen anyone else replying to you. I could be wrong, but here's my understanding:

In general, if there's any amount of time left on your option, it shouldn't make sense to exercise them*!

Imagine that by exercising them and selling the shares instantly you'd make $X. There's going to be a market maker, then, willing to pay *at least* $X for your options because they can get the same profit. I can't see any reason why they could be worth their intrinsic value *or less* at all.

Even if the bid/ask spread is very wide so deep ITM, market makers will often buy and sell from you much closer to the mid point than the bid/ask spread might imply. Even if you're not getting a "good" price, I can't possibly see how you could get less that *intrinsic value* (which is what you get if you exercise them early). Maybe start trying to sell at the ask, then "penny down" by editing the order and waiting a minute to see if any market maker buys it, then going a bit down again and so on (of course they're not going to buy them from you at the ask, but I'd start there anyway)...


*There are some rare cases where it makes sense, but they have to do with edge cases like dividend payments and such, and I don't think they apply to the problem at hand.

 

[Chickenlittle]

As options rise, their delta rises (e.g. their value changes more dramatically with respect to the SP). Likewise, they begin to take up an increasingly large % of your portfolio. Lastly, their pricing and greeks no longer represent the original options that appealed to you when you purchased them. All three of these things strongly suggest that you should roll them and take a bit of profit in the process.

Options are not like stock; their risk/reward profile changes over time, and thus you should always be asking yourself whether it's time to roll them.

Yes thank you for posting this. Multiple posts indicate that new option players don’t understand this

 

[Causalien]

My understanding of the primary reason to exercise vs sell and roll is if you are trading in a taxable account and selling them would trigger short-term gains. My understanding is that if you exercise and then hold the call and related converted shares for more than a year in combination, then it becomes a short term capital gain.

Beyond that, I don’t know of any reason to exercise but there may be other reasons I’m unaware of.

These depends on the country.

Hence talk to an accountant.