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Applying options strategy 'the wheel' to TSLA

Discussion in 'TSLA Investor Discussions' started by adiggs, Apr 16, 2020.

  1. Runarbt

    Runarbt Active Member

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    Selling naked puts at schwab do tie up some margin. They calculate this in a couple of different ways, one is:
    • 20% underlying value - out of the money amount + premium
     
    • Like x 1
  2. ReddyLeaf

    ReddyLeaf Active Member

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    Today’s drop was too good to pass up so closed out most of these at $1.00, 80% profit. It feels good to be out of those options for a tidy profit (and able to sleep well through the weekend). One account only has $30 in free cash available in the settlement account, so will wait until expiration or $0.15, or worse case sell some odd lot TSLA to fund the buyback. I’m still looking at the forward rolling position, but probably 19/26 Mar 750c/800c, and will likely wait until Monday to sell.
     
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  3. ZeApelido

    ZeApelido Active Member

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    Dang I guess I closed those covered calls too early. Oh well.
     
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  4. SN_8

    SN_8 Member

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    Whoever gave you that not advice is a moron.

    :oops:
     
    • Funny x 4
    • Disagree x 1
  5. ZeApelido

    ZeApelido Active Member

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    Lol, no worries I don't mind not trying to be too greedy.
     
  6. adiggs

    adiggs Active Member

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    I'm at Fidelity and have access to the roll transaction in my IRA(s). @Lycanthrope has mentioned previously that he didn't have roll transactions available but he also lives in Europe. My opinion - I see that you're in the US - you must really love your broker for other reasons if you're still with them without this particular transaction ticket. :)


    I closed out my remaining calls in the big position and established a new covered call position at $615 strike for Mar 19 delivery. That puts that account in a 795 / 615 inverted strangle. Much wider of a range than I would like to be in, but I also consider the near term bias to be downwards, thus the very aggressive call position. I also chose this aggressive position as I plan to take the very large premium ($40 or so) and use it on the next put roll (if necessary) to pay for a big improvement on the strike on its next roll. I also want more downside protection than a higher strike call would provide.

    I've previously said I expect we'll hit 600 before we see 800; I'm starting to think 500 before 800.

    I also consider low 400s to be on the table. My rationale is that was about where were at prior to the S&P announcement at which point the shares shot up from there. In effect I think of this as a retracement to fill in that big run up into the inclusion.


    In the other position - my test position - I closed out the calls today when the shares were around $640. I then lost track of time while doing other stuff and didn't open the replacement position. I'll be looking at a less aggressive call when I open that tomorrow - probably something closer to 650 than the 615.
     
  7. Oil4AsphaultOnly

    Oil4AsphaultOnly Supporting Member

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    wow, today was brutal. And I agree with adiggs that there's probably more downside coming.

    In light of that, what would you have done differently?

    Here's what I've done so far:
    TSLA @ ~790 on Feb 18, 2021.
    - STO 740P 2/26 for $10.93

    TSLA @ ~700 (and dropping) on Feb 25, 2021.
    - BTC 740P 2/26 @ $40.35
    - STO 725P 3/05 for $42.27 (net gain of $1.88)

    TSLA @ ~670 on Mar 03, 2021.
    - BTC 725P 3/05 @ $48.01
    - STO 715P 3/12 for $49.05 (net gain of $1.04)

    So far, my put options are ~$100/shr underwater (potentially being more underwater next week) and I've only made ~$1300 for 3 weeks of work. Could I have done anything differently (assuming that I stick with this rolling of options strategy)?

    I feel like if I close my put position and immediately buy the shares, my "cost" per share would be the strike price of 715 ($100 to BTC the put and another $615 to buy the shares in the open market). Contrast this with 740 if I had done the same last week instead of rolling. Which would be even better than the $790 per share price if I had bought the shares on the previous week instead of selling puts. Is that the right way to look at the progression of these trades?
     
  8. st_lopes

    st_lopes Member

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    I hope you’re wrong about 400s otherwise I’ll be giving up a lot of core shares to those margin calls.

    Had to let go of some trading shares so as to keep my puts active.

    Covered this weeks calls at 97% of premium. Have not reinitiated for next week yet.
     
  9. ReddyLeaf

    ReddyLeaf Active Member

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    Ouch. Damn, please stop that crazy talk. I’m out of powder and the idea of selling covered calls below 800 is really hard to accept. I have a large number of shares purchased in the 800s, so maybe I’ll just have to sit the next few months out.
     
  10. adiggs

    adiggs Active Member

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    Then you're really going to hate my other thought on this. I'm sure that there are other stopping points going down - but the next really big trading level that I see is $80 / share ($400 pre-split) - back to the top of the previous trading range. I really don't want to go that far down but I am also retired now and I need to be ok at that level or ready to return to the workforce (I choose option 1 :D).

    On the plus side - if I'm "right" then what an amazing buying opportunity we have coming.
     
  11. adiggs

    adiggs Active Member

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    The only thing I can add is that I think this is an example of the benefits of selling both calls and puts - not one or the other (or sitting out entirely when that seems appropriate).

    In my case, despite having some 795s puts that are close to $250 ITM now, I've also been generating very large call side premiums. The account value is still plummeting but the cash in that account is going up like crazy.


    I hope I'm wrong as well, but I'm getting ready for it. But this is also the sort of thing I'm always thinking about and preparing for - upside gains are nice and enable my wife and I to buy a nicer house. Downside losses, if brutal enough, means I that I've got meaningful and bad changes in lifestyle to make.
     
    • Helpful x 2
  12. adiggs

    adiggs Active Member

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    A brief position update for me.

    My significant position has been rolled to Mar 19 and is a 795/615 inverted strangle. The 615 call was sold yesterday when the shares were right around $615. I chose that very aggressive call for the large premium and mostly for the downside protection. I didn't expect 5-10% down today but I still consider the bias to be down -- even if we see flat to up for the remainder of today and tomorrow (uptick rule in effect).

    For the 795 put I will be deciding in a couple of weeks whether I roll only for time or if I also roll for a better strike. I've accumulated a lot of cash flow on the call side the last couple of weeks that can buy a big put strike improvement. I also consider rolling for time to have an inevitable conclusion - the shares come back and these puts finish OTM. That might be 6 months or more though :|

    The smaller test position is now a 790/580 inverted strangle, with that 580 call chosen for the same reason as the 615 call.


    Somewhat amusing - I've managed to twice sell calls in my brokerage account over the last couple of weeks that I intended to sell in an IRA. In both cases this mistake was in front of a big drop in the share price, so both mistakes have made me money. As opposed to when I've done that in the past and lost a few hundred bucks.

    Lesson that I still haven't learned - make sure the transactions are in the right account. Or get rid of margin so these mistakes will fail :)
     
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  13. Mokuzai

    Mokuzai Member

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    Interesting day...this morning rolled my 10x $845 -P for today to 10x Mar 19 $845 -P for a cool $1.25 credit. Not really much room to move when this deep ITM and didn't really want to push the date out beyond 2 weeks. I'll wait till Monday to open new calls for the other side of the strangle in case we get a rally. This is playing hell on my margin maintenance but still staying pretty well above water.

    Aside from the short strangle strategy I took a bunch of leaps I had for Mar 17 2023 -C at $1,500 and rolled them to the same date but $1,200 since those $1,500's were up significantly. This netted $25 credit and used that to buy 150 shares at $558 plus enough cash left over for a SR+ M3 if I wanted. On paper the new calls are down around 15% right now but whatever...have no intention of letting those ever exercise. Time will tell if this ends up to be a mistake.
     
    • Informative x 1
  14. cbh03

    cbh03 Member

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    I bought 100 shares on the dip today (unfortunately at $580, not $540) and am looking to sell a covered call with a high probably of assignment in the $650 range. I am looking at March 19th. Does anybody have any not advice regarding whether I should sell the CC this afternoon or Monday (hoping for a Monday pop)?
     
  15. adiggs

    adiggs Active Member

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    My not-advice - I believe that with briefly being down 10% today we have triggered the uptick rule for the balance of today and all of Monday. The history of these events (or my memory of the history as I've followed Tesla for 8+ years) is that we trade flat to up on days with the uptick rule in place.

    I had a CC position I sold today when the shares were around $580 (on the way down). If we'd hit the 10% threshold already I would probably be waiting into Monday to start that position.


    Then again we're at 597 this moment when I went looking, and I bias towards sooner than later for opening new positions. I also bias towards keeping both short puts and calls open full time, so my not-advice has that background as well.
     
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  16. setipoo

    setipoo Breaker of Chains and Mother of Dragons

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    i sold that yesterday 05Mar21 650 @3.21
     
  17. Stretch2727

    Stretch2727 Engineer and Car Nut

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    #2277 Stretch2727, Mar 5, 2021 at 12:51 PM
    Last edited: Mar 5, 2021 at 12:57 PM
    My trade for this week for expiring March 12 options below netted about $7.4K today. I am assuming the puts from last week will assign so I picked up 200 shares in a down week. I sold a bunch of my index ETF earlier in the week so I have cash for the puts. You do need a bunch of cash to make this work especially in a down market. The volatility greatly increased the premiums!

    Layer 1 Strangle
    645C
    590P
    Layer 2 Strangle
    670C
    570P
     
  18. Oil4AsphaultOnly

    Oil4AsphaultOnly Supporting Member

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    Fortunately, I have been rolling down the covered calls to harvest income there (lowest priced call is 740C 3/19, because I'm too chicken-*sugar* to go lower than that). I just wanted to make sure that I have the perspective right on the puts side.
     
  19. generalenthu

    generalenthu Supporting Member

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    I sold some calls aggressively today at 650 and 700 for 3/19 expiry.

    That was after converting a portion of my stock to twice the notional equivalent 400 calls couple of weeks ago which was horrible timing.

    I have a feeling that there is some agressive call selling and any move higher will be self perpetuating due to gamma.

    Anyways, couple of interesting weeks ahead with expiring march contracts that will result in a small upside bias.
     
  20. juanmedina

    juanmedina Active Member

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    Wow that didn't aged well. I rolled the $610's to March 19th $530 and April 1st $480's for a tiny premium... I rolled them at the wrong time.

    I converted some shares to Jun 22 $600's at what it seems to be so far at right time. They are already up 13%.
     

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