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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Yes, me too! I just closed some out for nice profits (rather than wait further and have them expire worthless) hoping for a bump in the stock price later in the day/tomorrow so I can "re-sell" the covered calls for later weeks at a higher price and make some additional profit.
I'm surprised it's only 70% bought or sold to close. I'd have guessed much higher
But the overall point is the same - most options are closed early and don't reach expiration date/time.
LN1_Casey
Draco dormiens nunquam titillandus
Well, looks like my sold call for this Friday will expire worthless . Though I wonder what this is going to do for the IV? In the short term may squish it, but dunno, next week is 3 trading days and a weekend for traders to digest what was presented, and update their calculations. May pop then.
. Though I wonder what this is going to do for the IV? In the short term may squish it, but dunno, next week is 3 trading days and a weekend for traders to digest what was presented, and update their calculations. May pop then.
An update - I had Oct 520c and Oct 620c positions that I've closed this morning.
I decided to take advantage of the big price drop today, especially relative to that 520c position that was getting a bit close ITM earlier this week, to close these out at ~75% profit. I had expected that it would be at least another 2 weeks before I had a good early close opportunity, and I wanted to get these closer to 90% profit.
Mostly, this early close takes a sharp price spike upwards leaving those 520c in the money in a few weeks. I've had some of these recent strong upwards moves hit covered calls, and eliminating that possibility now at a good profit is an important component of my thinking here.
I haven't yet opened replacement positions. The observation from many people (and myself) is that Tesla reporting good news tends to take a few days to a few weeks to get priced into the share price. My feeling is that this has been a buy the rumor, sell the news, event; and today is the sell the news side.
So I'll be monitoring the share price and looking for another IV spike AND (an expected) share price spike before I open a new covered call position. At the moment, I think that'll be in the run up to the Q3 earnings report.
NOTE - I am remarkably bad at picking direction, magnitude, and timing of share price movements, so take my expectations of what the share price will be doing with a mouthful of salt. And if it helps, I AM making investment decisions based on these expectations, so they're more than random musing for me.
I decided to take advantage of the big price drop today, especially relative to that 520c position that was getting a bit close ITM earlier this week, to close these out at ~75% profit. I had expected that it would be at least another 2 weeks before I had a good early close opportunity, and I wanted to get these closer to 90% profit.
Mostly, this early close takes a sharp price spike upwards leaving those 520c in the money in a few weeks. I've had some of these recent strong upwards moves hit covered calls, and eliminating that possibility now at a good profit is an important component of my thinking here.
I haven't yet opened replacement positions. The observation from many people (and myself) is that Tesla reporting good news tends to take a few days to a few weeks to get priced into the share price. My feeling is that this has been a buy the rumor, sell the news, event; and today is the sell the news side.
So I'll be monitoring the share price and looking for another IV spike AND (an expected) share price spike before I open a new covered call position. At the moment, I think that'll be in the run up to the Q3 earnings report.
NOTE - I am remarkably bad at picking direction, magnitude, and timing of share price movements, so take my expectations of what the share price will be doing with a mouthful of salt
. And if it helps, I AM making investment decisions based on these expectations, so they're more than random musing for me.
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@adiggs
I was looking at a covered put that is out of the money. The premium is pretty high.
I had some concerns that I hadn't interpreted it correctly. This is a weekly. October the 2nd. Strike is 540.
(TSLA) Call Put Options
I was looking at a covered put that is out of the money. The premium is pretty high.
I had some concerns that I hadn't interpreted it correctly. This is a weekly. October the 2nd. Strike is 540.
(TSLA) Call Put Options
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I am also trying to snag some LEAPs, but prices are so far out of whack it doesn't make sense right now IMO.
In March I got a JUN 2022 call for ~33.00 post COVID. Right now its worth 790.00 (pre split). I could buy 1/5th of that for 160.00 today. So the value proposition is just ridiculous compared to what it was before.
So then lets look at way out of the money (OTM) strikes. Jan 2023 500 strikes are 150.30, 900 strikes are 93.00. So pretty outrageous compared to the paltry 33.00 I spent in March for 1/5 of of the exposure. I am not sure I want to gamble 93.00 on the fact that TSLA is going to TRIPLE in value (to 1.2T market cap) in 2 years.
It seems more reasonable to go for a slightly OTM option -- so JUN 2022 $500 strikes are $120.00. I'd rather take that bet versus the 900 JAN 2023
LN1_Casey
Draco dormiens nunquam titillandus
A put? 540 would be in the money, not out. Out of the money for puts is BELOW the stock price, while Calls are ABOVE the stock price. I mean, it'd be great to have the stock price back above 540 by next Friday, but I don't think it'll happen without some sort of announcement from an organization with S and P in their title.
For a put option, the 540 strike is in the money. I.e. - you are ready and willing to buy shares at $540 that currently trade around $380. That'll be why the premium is really high (the $160 in the money plus some time value, which won't be much at all for an option expiring next week).
(NOTE: I know the shares aren't exactly $380 - I'm using that as an approximately correct number as a discussion point throughout this response).
For a put to be OTM, the strike will be lower than the share price (not higher). You might be looking at a $300 strike to be OTM if you want to avoid assignment. Or if you really want the shares and be paid to get them, you might go up to very close to the share price. Say the $380 or even $400 strike (the $400 strike would be a some ITM, increasing the likelihood of assignment; you'd only come up to this level because you really want the shares AND you'd like to be paid to buy them). If you're willing to buy the shares, but you'd rather earn the income and stay in cash, then a really aggressive position might be the $360 strike. The shares only need to go down $20 and you'll be getting the shares. And if they don't then you keep the premium and stay in cash (i.e. - don't buy the shares).
Does that help, and make sense? You didn't mention whether you're really looking for the shares, or if you really just want the premium but not the shares.
A question for you - have you been out to option alpha and gone through their intro option training / education? There's a link on the first page of this thread and is what I consider to be the minimum education level to be selling options (or buying as well, but I don't know that side very well). Figure on about 30 hours to get through all of it
You might find better LEAP related insight in the Options trading strategy / advice thread (2nd page right now, just barely). I know there are people here who have been doing well buying options, but most of the conversation here is on the selling options side. In my particular case, we can be confident that I won't be helpful - my experience buying options is that I'm bad at predicting direction, magnitude, and timing of the share price changes mostly resulting in my giving away money by purchasing options
That doesn't mean you can't use this thread to look for insight on anything related to options. Just that you might find that the mix of contribution here to be less useful than that other thread.
The one observation I'll make that -might- help, is to look again at those LEAP prices after earnings. There is a tendency for IV to increase going into earnings, and then fall after earnings. That might help you find better priced LEAPs. And maybe not due to a big increase in the share price. And you might a big upward move in the shares going into earnings, and then a big drop after earnings (buy the news, sell the rumor). So many things that can happen
. And this is why I sell instead of buy options - if I hold them to expiration, then the option premium WILL go to 0. I might lose money on the trade, at least on an unrealized basis, due to the options finishing ITM, but the premium is guaranteed to go to 0.This week it was kind of bitter sweet for me.. I had the chance to make some decent money but I lacked conviction.
I end up at $4125 for the week. The premiums for next week look sad.. .as of I right now I don't think I am going to sell any calls for next week today. I can only get 100 bucks per contract strike $500. Hopefully we get a big bump on Monday so I can sell some more calls.
Yes, I closed out a bunch of calls early thinking I might have the chance to re-sell them on a battery day bump. Fortunately, I harvested about 65% of the premiums, but did wind up leaving money on the table and similarly, think the premiums are paltry right now for writing new short term calls. Hoping for a big Monday SP increase to open up some additional opportunities.
I expect you'll have a very good opportunity at covered calls as we near deliveries, and again as we approach the earnings report. I expect both events will have enough uncertainty that we'll see IV spike as we near them, and then drop after the reports. This is my opinion and you should realize that, broadly speaking, I am bad at predicting direction, magnitude, and timing of share price moves. Then again, I do have some shares that don't have calls written against them right now and am awaiting those two events looking for a good entry to sell more calls (so at least I've got skin in the game for this point of view).
When selling covered calls now, I keep that Friday a month or so back in mind where the shares moved more than $200 that day. I did end up making money on that position, but to get there, I had to roll a 1460 call up to 1700 (while the shares were trading at 1750) to avoid assignment and paid an $80 premium to get there (share amounts pre-split of course). I was then hoping (hope realized) that the share price would move back down below $1700 so the second position would expire worthless. Before the roll, I was looking at an unrealized loss (with realization that day at close of trading) that was larger than all the option selling I had done over the previous 4 months.
My point is that seemingly safe covered calls are almost always safe, until they aren't. And the 'unsafe' positions can go a long ways against you, really fast. My own personal covered call rule now, as a result, is that I only write calls at strike prices that I really am ok selling my shares at. Something I learned that day is that I wasn't ok selling at $1460, and thus I shouldn't have opened that position.
That usually means these days that I need to use monthlies instead of weeklies, and have even gone out to a 2 year option (Sept '22, 840c) in one case. For me, I need an $800 strike these days to be comfortable on calls, though the $600 strike has also been fine previously. It also means that I really am writing fairly small calls that really are just income level gains (I had started getting away from that as every trade worked with a lot of cushion).
My post from earlier this week was me getting out of the remaining covered calls where the strike was too low for this new personal rule.
Best of luck with your option sales!
I got the vernacularly wrong. I was more interested in the premium.
Why not covered Puts?
Why not covered Puts?
I personally like doing both. The reason being that it helps me be more indifferent to share price direction. One direction is always to my benefit, and the other is to my detriment. Since I'm bad at picking future share prices, this provides me with some degree of being neutral to the market.
I've also found with TSLA, that moves in one direction frequently enable me to close one side early, and then when the shares reverse, close the other side early. AND that I am far more sensitive to the downsides of covered calls (selling shares I don't want really want to sell) than I am to the downsides of covered puts (buying shares that I'm not really looking to acquire, because I have enough already; I've ridden some 50% drops down and back up, so I know I have a lot of flexibility on the covered put side!
But one needs both shares and cash to do both, and a willingness for each to turn into the other (hence "the wheel" strategy) or to make use of alternative closing options to extend the trade that @bxr140 has talked about previously in this thread.
I don't have any cash to sell puts in my accounts but I could do some on margin and I also haven't lost any shares to covered calls yet to sell puts. I did sell some $340 puts for my parents last week and yeah the premium are better on the put side. I still have some options that I bought that I need to close in my retirement accounts that when I close them I might use that money to sell puts.
The only thing I like about selling weekly calls is that I feel like my potential risk is capped; there is only so much the stock can go up in a single week. I am a long term share holder so my thinking is "why not make some extra money while I am holding
". I use the earned premiums to buy shares if the stock has gone down and buy options if it makes sense. I sell risker calls when the stock is high and when I am ok with loosing my shares, otherwise I give myself as much room as I can incase the trade goes wrong and keep enough cash to close the trade early. The downside to the weekly call is the effort it takes and to have to think about them over the week.
Something that has arisen for me - I've sold enough covered calls in one account, that I now have enough cash there to also start writing covered puts. That might not happen immediately, but if you don't need that cash short termish then this might be a mechanism to start writing puts as well in that account.
Additionally - I've used cash raised from selling covered calls, before the covered calls are closed, to sell some covered puts. That cash from selling covered calls, even if not closed yet, is not sequestered as it will be when you use it to back some covered puts. It sure does feel like double dipping to me
And you'll really want to be conscious about risk, though the 'risk' on the puts is that you end up buying shares with that covered put cash, meaning you end up with more shares at a discount from when you sold those covered puts. Hopefully in that case, you actually want those additional shares!
Hi adiggs, hi all!
I’m joining now the $TSLA-Wheel-Team!
After watching the option alpha tracks and especially episode 107 I decided to start the wheel. Some google research and I found this perfect thread, thanks for that!
Today I started and sold ITM puts, because I wanted the stocks for the delivery numbers next week.
At Monday I’ll sell a covered call, I will have to check the premiums to decide which expiration time I’ll chose.
At the moment I can comfortably cover one contract with cash without using the margin. I’m thinking about using the 2-contract-strategy, but using margin.
I’m looking forward to exchange ideas with you!
I’m joining now the $TSLA-Wheel-Team!
After watching the option alpha tracks and especially episode 107 I decided to start the wheel. Some google research and I found this perfect thread, thanks for that!
Today I started and sold ITM puts, because I wanted the stocks for the delivery numbers next week.
At Monday I’ll sell a covered call, I will have to check the premiums to decide which expiration time I’ll chose.
At the moment I can comfortably cover one contract with cash without using the margin. I’m thinking about using the 2-contract-strategy, but using margin.
I’m looking forward to exchange ideas with you!
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