Wiki Selling TSLA Options - Be the House

[adiggs]

I don't know the answer, but I know that I DID pay the tax on the 1.70 premium I collected on $29 strike puts I sold back in 2012 (that expired in the money and were exercised).

I didn't know about the idea of rolling the option premium into the purchase price (or even if that was a thing). It didn't matter before, but I'm selling so many options now, it looks like something I need to learn. If you get an answer, please let us know!

Here's a link that starts in on tax treatment for options:
How Are Futures & Options Taxed?

• If the written option was a put and the option gets exercised, the writer would simply subtract the premium received for the put from their average share cost. Again, depending on how long the trade is held open for from the time of option exercise/ shares were acquired to when the writer sells back the shares, the trade could be taxed on a long- or short-term basis.

My reading is that if you've sold puts repeatedly before finally getting assigned, then the option premium on the assignment sale (only) can be subtracted from the buy price to establish your cost basis. The other put sales that were bought back or expired worthless are each taxed individually.

Looks like I should have not paid the tax on that 1.70 put premium all those years back, and instead have a cost basis of 27.30 instead of 29.00. that I think I have. Oops

 

[ggr]

Here's a link that starts in on tax treatment for options:
How Are Futures & Options Taxed?

My reading is that if you've sold puts repeatedly before finally getting assigned, then the option premium on the assignment sale (only) can be subtracted from the buy price to establish your cost basis. The other put sales that were bought back or expired worthless are each taxed individually.

Looks like I should have not paid the tax on that 1.70 put premium all those years back, and instead have a cost basis of 27.30 instead of 29.00. that I think I have. Oops

Thanks for finding that! I agree with your interpretation. It has a pleasing symmetry.

 

[adiggs]

Something I'm trying out right now - I've got short date puts expiring tomorrow, sold last Friday or so. I went for 1 week on these as I didn't feel like the share price and IV made this a particularly good time to sell puts, so I went for a sale I felt was safe and where the objective was to make a small amount of money while marking time until a better put sale opportunity comes along. These were $1.34 each and they're working about as I'd expected; looks I'll ride these to expiration tomorrow or close out very close to the end of trading (I'll probably enter a $0.01 buy to close tomorrow so I don't hold these after hours, even if they're ~$100 OTM - the earlier lesson resonates, and I'd rather get in the habit of paying $1/contract to ensure that I never experience that lesson personally).

I've also got some calls on that I sold a week ago. These expire 5/29. I went out 3-4 weeks on these as I felt like the share price at that time was more favorable for selling calls, and I wanted to collect more premium up front and hoped for a significant pull back that would enable an early close for more total money. So far so good - I think I got greedy today as I had an opportunity to close with me retaining 60% of the premium, but I let it go for now and I'm back to 40% ahead at the end of the day.

The idea on these calls is that with the timing being more friendly to call sales, my thinking is that by acquiring more total premium up front (more than 1 week duration), then I have more total premium to keep. And I'm really looking for a pullback that enables an early close (if I'd closed today, I'd be 8 days from open to close, for about a $5 earned premium -- I shoulda closed today when I was >50% on these).

With these longer dated options, I lose out on the immediate time decay of the final week decay, but I gain greater exposure to share price moves. By selling calls at the upper end of the trading range, a reversion downwards will be very beneficial.


So generalizing - what I'm testing now:
- when the premiums are especially small (whether IV, or share price at the wrong end of the trading range), sell the next week options for small premium, marking time for a better opportunity (it's still an excellent dividend). Here I'll be looking to earn 80%+ of the premium by waiting it out (close early only for a better looking trade that comes along).

- when the premiums are larger (whether IV or share price being at the good end of the trading range for the option type), then go out 2-5 weeks so the total premium is larger and look for mean reversion to get 50%+ of the premium in a short time.


Continue choosing strikes that meet the larger criteria - I'll be happy to be assigned at that strike. For the calls that means $1000 or higher right now. For the puts, my weeklies are at $695 (I see an OI wall at $700, so I think the market makers etc.. will be working for me to keep the share price above that level). I intentionally chose that strike to be 1 further out than the OI wall.

 

[Tslynk67]

Something I'm trying out right now - I've got short date puts expiring tomorrow, sold last Friday or so. I went for 1 week on these as I didn't feel like the share price and IV made this a particularly good time to sell puts, so I went for a sale I felt was safe and where the objective was to make a small amount of money while marking time until a better put sale opportunity comes along. These were $1.34 each and they're working about as I'd expected; looks I'll ride these to expiration tomorrow or close out very close to the end of trading (I'll probably enter a $0.01 buy to close tomorrow so I don't hold these after hours, even if they're ~$100 OTM - the earlier lesson resonates, and I'd rather get in the habit of paying $1/contract to ensure that I never experience that lesson personally).

I've also got some calls on that I sold a week ago. These expire 5/29. I went out 3-4 weeks on these as I felt like the share price at that time was more favorable for selling calls, and I wanted to collect more premium up front and hoped for a significant pull back that would enable an early close for more total money. So far so good - I think I got greedy today as I had an opportunity to close with me retaining 60% of the premium, but I let it go for now and I'm back to 40% ahead at the end of the day.

The idea on these calls is that with the timing being more friendly to call sales, my thinking is that by acquiring more total premium up front (more than 1 week duration), then I have more total premium to keep. And I'm really looking for a pullback that enables an early close (if I'd closed today, I'd be 8 days from open to close, for about a $5 earned premium -- I shoulda closed today when I was >50% on these).

With these longer dated options, I lose out on the immediate time decay of the final week decay, but I gain greater exposure to share price moves. By selling calls at the upper end of the trading range, a reversion downwards will be very beneficial.


So generalizing - what I'm testing now:
- when the premiums are especially small (whether IV, or share price at the wrong end of the trading range), sell the next week options for small premium, marking time for a better opportunity (it's still an excellent dividend). Here I'll be looking to earn 80%+ of the premium by waiting it out (close early only for a better looking trade that comes along).

- when the premiums are larger (whether IV or share price being at the good end of the trading range for the option type), then go out 2-5 weeks so the total premium is larger and look for mean reversion to get 50%+ of the premium in a short time.


Continue choosing strikes that meet the larger criteria - I'll be happy to be assigned at that strike. For the calls that means $1000 or higher right now. For the puts, my weeklies are at $695 (I see an OI wall at $700, so I think the market makers etc.. will be working for me to keep the share price above that level). I intentionally chose that strike to be 1 further out than the OI wall.

Good to hear your thoughts - what price are you selling calls at?

I never considered selling *sugar*-puts as the premiums are low when I look - like $0.02 for 29/5 $100 strike... how did yo manage to get $1.34??

I more aggressive with my put sells, I have one expiring today at $795. If the SP rises into the $800's then I'll buy it out and look to sell a similar strike for 29/5, or perhaps even a higher $8XX strike for today, wait and see.

To be clear, I'm not afraid to have the put exercised and receive the shares, in fact I welcome it as long as the SP isn't too far below the strike on close. It brings selling a call into play the following week or just selling the shares early in the week when the SP typically rises.

 

[adiggs]

Good to hear your thoughts - what price are you selling calls at?

I never considered selling *sugar*-puts as the premiums are low when I look - like $0.02 for 29/5 $100 strike... how did yo manage to get $1.34??

I more aggressive with my put sells, I have one expiring today at $795. If the SP rises into the $800's then I'll buy it out and look to sell a similar strike for 29/5, or perhaps even a higher $8XX strike for today, wait and see.

To be clear, I'm not afraid to have the put exercised and receive the shares, in fact I welcome it as long as the SP isn't too far below the strike on close. It brings selling a call into play the following week or just selling the shares early in the week when the SP typically rises.

I don't know how I got the $1.34 premium . That was on 660 puts on their day of expiration. Share price was above $700 that day - about $80 out of the money. Looked like there was no chance it could fall that far, that day, and I didn't want to get any closer (I could probably have gone up to a 690 strike, but I'm assignment averse). One way I was looking at that situation - I couldn't imagine a circumstance where I thought that was a good option to buy - so that made it an excellent option to sell.


The calls I've been selling are 1000 strike. The ones I have open right now are 5/29 - I went out a couple of extra weeks to improve the premium (got about $9 each). At the time the stock price was a little higher in the current trading range, so I went out a little further in time to capture a bit more premium.

I'm more worried about risk to the upside, so I've decided I'm not going to sell calls any closer than the 1000 strike right now (I'm very assignment averse on my call sales). Given that these calls expire, I might go up to a 1200 strike with the next calls, and I might stay with the 1000s on this 2-4 week expiration window.


On the put side, I sold 695 strike for expiration today, last week, for about a 2.20 credit. I've closed those today and sold the 695 strike again for next week for a $4.24 credit. If I'd acted yesterday, I would have missed out on .10 of time decay today, and gained an extra $1 on the credit for next week - I'm going to keep a closer eye on rolling out in the future (it seems like I learn something with every trade - while getting paid!).

I'm less averse to being assigned on the put side than the call side, but still not looking for put assignment. If I do get assigned I want it to be due to a pretty big down move, which will increase the chance of a big move up right afterwards. I chose the 695 strike as there are 2 open interest walls between the current share price and the strike price I've sold. Over the course of a week, I figure that makes the likelihood of assignment lower than the delta would suggest.

The 695 strike puts had a delta of .10 when I sold them, suggesting that the market sees a ~10% chance of these finishing ITM. I think that's artificially high due to the OI walls (mitigated by next week being a weekly expiration rather than a monthly expiration as today is).

Another way of thinking about this strike - I don't really want to acquire more shares at $795 / $800. But I think I'll be happy to acquire them at $695.

(All of this within a larger dividend generation strategy, and less of a capital appreciation / swing trading strategy. I'll take the smaller premiums and never being assigned as a great outcome).


I've also got a larger macro view that is pretty negative. I believe that Tesla is the best investment I know of for riding through that negative macro view, but I've also seen excellent companies get discounted 50% within a larger market sell off. So I'm sticking with weeklies on the Put side, partially in preparation for the stock selling down 50% - I figure if it happens, it won't happen faster than a week, so I'll see it coming to at least some degree and won't be locked in for too long.

 

[Tslynk67]

I'm a big believer in closing cheap options I've sold, primarily for the reason you cite - the constraint on your cash or shares is lifted, and you can establish a new position against that cash / shares immediately.

I wonder if you can sell to open a new option position after hours? I've never done any after hours trading, so I don't know what's available.

Can't seem to sell options AH - at least not with my broker in Europe. I'm putting in a $785 buy order though - doubt it will trigger, but you never know.

 

[adiggs]

Continuing my education and trying something new - on the put side (not on the call side, at least not yet), I've closed one contract in my currently open put position, and opened a new put. The new put is the $780 strike for this Friday, with a delta of .26. (The rest of the puts are aging down, with only .48 left to go; not much to earn, but I don't have a new position I'd like to open with them right now, so I'll keep collecting that .48 residue).

The idea here is to take 1 contract worth of my overall position, and play the wheel more aggressively with it. This is sort of my "I dare you to assign me" contract. I would still prefer that the option not get assigned, which is why I'm down at the .26 delta. I don't anticipate that I will ever trade my full Put position this aggressively, but I might continue with the 1 contract worth.

At this delta level, being assigned is inevitable if I trade this level week after week. My intention, when assigned, will to then be selling similarly aggressive calls on this 1 contract worth of shares. The hope is that the put strike to call strike will be roughly the same (with a preference for a slightly higher call strike; i.e. in this case, I'd be selling the 780 call strike or maybe a little higher if this one gets assigned); the real emphasis is on the option premium, with the hope/intent to be neutral to slightly positive on the strike to strike change.


I sort of feel like the timing for this particular contract is less than ideal (bad), this being an up day for TSLA. But if we continue up or sideway for a couple more days, then I might be able to close early, and sell a better timed and priced put later in the week for 5/29 expiration (I don't anticipate any of these more aggressive strike puts being more than 8 days out from expiration. Like close Wednesday afternoon, and then open a new put on Thursday or Friday (in line with the Mon-Wed up, Thurs-Fri down, pattern that hasn't work so well for me so far ).

 

[adiggs]

I've also got some calls on that I sold a week ago. These expire 5/29. I went out 3-4 weeks on these as I felt like the share price at that time was more favorable for selling calls, and I wanted to collect more premium up front and hoped for a significant pull back that would enable an early close for more total money. So far so good - I think I got greedy today as I had an opportunity to close with me retaining 60% of the premium, but I let it go for now and I'm back to 40% ahead at the end of the day.

This trade has worked out well for me. I was able to close these calls today for 70% of the original sale price (sold at $9 or so; closed at $2 or so). I also reopened new 1000 strike calls for June 12 for about $9 again. The combination was a roll, but I traded each leg separately. So virtually an identical trade after 2 weeks, for a 2 week later strike. Over these 2 weeks the share price has moved up and IV has gone down yielding a nearly perfect balance in the option premium. Delta on these new calls is .14 - reasonably high for me, but still require TSLA to reach an all time high between now and June 12.

One element in favor of going out a few weeks is that with the recent move up on the share price, it seems like a good time to be selling calls and by going out a few weeks I capture more premium. If we get a small move down - say to $775 or so, the premium on these is going to collapse and I'll net out more total premium (absolute $) than I would by selling the 1 or 2 weeks call.

 

[adiggs]

You know you picked the right price to close (or open) a position when you get a partial fill, then another partial fill, and need another fill to finally get the whole order filled.

Assuming of course you can wait around all day for 3 partial fills of a position.

 

[adiggs]

IV continues going down. The 5/29 ATM strikes are showing .59xx IV, first time I've seen the ATM strike under .60.

At the beginning of the month (5/5), I recorded the ATM IV as .749. No wonder it's getting harder to find good deals for option sales

(side note - beyond the basics of each trade, I've gotten in the habit of recording the ATM IV and option delta on each trade. The IV gives me an overall idea of the option pricing environment, and the delta helps me understand how aggressive / prob OTM I've gone for each trade). Recording that info also gives me some historical perspective. I'm sure I could get a chart somewhere to show me that as well.

 

[Tslynk67]

Sold a $825 call for this Friday towards the close yesterday - $930 more cash in the bank. If I had been more decisive and done this earlier in the day, could have been close to double that.

So now I'm looking to keep this shares I bought Monday and sell a weekly against them until exercised. Selling a put for the same strike date to weekly. Close out put on Friday afternoon, buy for next week. Let the call expire and buy on Monday first thing.

That's the plan for now...

 

[adiggs]

Continuing my education and trying something new - on the put side (not on the call side, at least not yet), I've closed one contract in my currently open put position, and opened a new put. The new put is the $780 strike for this Friday, with a delta of .26. (The rest of the puts are aging down, with only .48 left to go; not much to earn, but I don't have a new position I'd like to open with them right now, so I'll keep collecting that .48 residue).

An update on this "I dare you to assign me" put. I'm rolling these over aggressively, and making more on this 1 put than any other individual contract (not a surprise with it being so close to the money).

I started experimenting with this on 5/18:
- 5/18. Sell the 5/22 780 strike, close on 5/20 (net +5.40 premium)
- 5/20. Roll the 5/18 sale out (1 week later, same strike). Sell the 5/29 780 strike, close on 5/22 (net +7.60 premium)
-- Rationale - Similar delta 1 week out, and a LOT more premium (therefore, more time decay day after day). Downside, this new option is about 9 days to expiration (instead of 2), and for this strategy, I'd like to keep it down to 3-7 days.
- 5/22. Roll the 5/20 sale UP to the 795 strike, same expiration. (position currently open)
-- Rationale. With the stock trading more up than down, delta on the 780 strike is down to .22 or so. By rolling up, I get the delta back to .30 while also increasing the premium on the option expiring 5/29 (so more premium decaying each day, and now we're down to 7 days to expiration from 9).

So far, these options are being rolled to something closer to what I'm aiming for every 2 days. That is faster / more often than I expected. So far, none of these options have experienced a sharp move against them (down). This being TSLA, that can't continue, and I need to see what that looks like. Then again, this is my "I dare you to assign me" put, so a move back to something under $795 is (in a sense) what I'm looking to have happen.


My best guess of the moment is that I'll be looking for a .30 delta put option for 6/5 next, probably on Wednesday of next week in preference to Tuesday. I would need a pretty strong up move to be looking for another 5/29 option sale either Tue / Wed.

 

[juanmedina]

Are you guys doing the option selling in IRA accounts? If so which company are you using?

I been going through the Options Alpha modules and I am hopping to start selling options soon. I was wondering if you guys have fairly large accounts because if you follow Options Alpha video on account size adjustments to trade Tesla options you would need a decent size account. I only have 102 shares in my IRA.

 

[llirk]

Are you guys doing the option selling in IRA accounts? If so which company are you using?

I been going through the Options Alpha modules and I am hopping to start selling options soon. I was wondering if you guys have fairly large accounts because if you follow Options Alpha video on account size adjustments to trade Tesla options you would need a decent size account. I only have 102 shares in my IRA.

You can apply strategies like an iron butterfly or iron condor which limits your upside and downside risk and therfore also limits the amount of purchasing power required in your account. Can be very handy for accounts with a smaller amount of funds.

 

[adiggs]

Are you guys doing the option selling in IRA accounts? If so which company are you using?

I been going through the Options Alpha modules and I am hopping to start selling options soon. I was wondering if you guys have fairly large accounts because if you follow Options Alpha video on account size adjustments to trade Tesla options you would need a decent size account. I only have 102 shares in my IRA.

I am actively selling covered calls in my Roth IRA. The shares I'm selling those covered calls against were acquired in the Roth via a Put sale 8 years ago. So I've done both, and I expect it's the same restrictions on what you can and can't do for IRA's and Roth IRA's. I'm at Fidelity, though I'd expect this capability to be available at any self directed IRA. I also have a 401k with my employer - I don't have the choice to do this there (I'd roll it over into an IRA and starting doing the same strategy with that money if I create a rollover event).


Regarding OA, keep in mind that they're not just teaching Option basics - they're also teaching a particular option trading strategy (sometimes called "Selling Volatility"). I learned a lot from OA, but I'm not using their trading strategy. There is at least 1 interview / article on their website where they talk about The Wheel option selling strategy, but even there it's a different strategy than the one I'm making use of. Namely - their wheel involves selling options in many underlying, and I'm only using 1. Their strategy is based on not knowing much about the underlying you're trading in - the focus is on the technicals and whether it's a good entry (and exit) time or not, using information like relative IV for that underlying (TSLA relative IV is low right now, while being high relative to the market - this is a bad entry time for TSLA in their strategy).

My approach involving the single underlying is predicated on a few interlocking ideas.
1) I know the company, and believe I have an information edge over most other investors in the company (of course, I can be wrong).
2) When I sell Puts, I sell them at a strike that I would be comfortable and preferably happy to be assigned. This 'limits' my downside risk in that I want to buy shares at that price when I sell the Put, so being paid to buy the shares is a nice bonus. My real goal is to avoid assignment, but it's important to be willing - even eager - to be assigned.

And related - if I am assigned and then I see the stock trade down a lot, so that I can't sell Calls where the strike would be a wash, then I'm ok with owning the shares for an extended period. I've been buy-and-hold on Tesla since 2012 with all those ups and downs since then - owning more shares won't be a problem (because of my knowledge and confidence in the company - this is decided non-Wheel).

3) When I sell Calls, I only sell them at a strike I'd be happy to be assigned at. Maybe better - can I look myself in the mirror after assignment and not feel regret. This is why I'm selling 1000 strike calls and above right now - anything lower is too risky for me.

And in both cases (puts, calls) the options I sell are fully backed.

There's more details in what I've been doing, that is different from what others are doing. I'd say that most everybody in this thread is doing something recognizable The Wheel (sell Puts until assigned. Sell calls against the acquired shares until assigned. Repeat).

I might be the furthest OTM - some are very close OTM or even ATM. Different strategies for different outcomes, interest, stakes, effort, risk tolerance, etc..


I don't follow the OA guidance regarding position size. In fact, being as far OTM as I am with strikes I'd like being assigned, I'm typically closer to 100% of cash and shares backing an option sale.

 

[adiggs]

For those tracking their trades, I'm curious what information you're tracking.

I am tracking my trades, and the info I'm tracking on each trade (Put side):
- opening date
- the contract being opened
- the ATM IV for that contract expiration
- the delta of the option I'm opening
- the share price when I open the trade (I don't bother doing this precisely - rounded to even dollars and sometimes a $5 multiple)
- # contracts
- income

On trade close, I add:
- close date
- closing cost (a negative number)

From that, I calculate:
- Days open (dynamic throughout the trade)
- Profit (income + closing cost)
- Profit per day per contract traded. This is to normalize 1 contract trades with 5 contract trades, and 5 day trades with 1 day trades.
- Return (Profit / Capital that backed the trade)
- Profit % (closing cost / income). I want to know how much of the original premium I kept. Generally speaking, my results are going up as this number is going down towards 50% (or at least 60% - when I started doing this a couple months back, profit % was in the 90s typically).


Only differences on the Call side - I calculate the capital backing the trade as the cost to buy the shares at transaction time. Alternatives - I could calculate this based on the price I paid for the shares originally (huge increase to trade return due to the low purchase prices). I prefer the current share purchase price, as I think it's most comparable to the cash secured put, and it emphasizes the dividend mentality I'm trying hard to maintain.


I roll all that up into a puts and calls pivot table that groups trades by closing date and month, to track monthly income or loss.

21 trades in, and I'm 20/21 (1 losing trade), with 4 open trades.


The most useful historical information are the ATM IV and delta when I entered the trades. That's helping me track how aggressive I am in my trading. The ATM IV is proving helpful to understand the changing environment in which we've been trading. When I started tracking this, ATM IV was near 75%. It went down as low as 52% (Friday on a 5/29 expiration option), and is mostly upper 50s for the last week or so. Middle of the month was more like mid 60's and low 70's (my IV tracking doesn't go back further than that).

I also find the days open useful, to track how quickly I'm getting out of trades. Call side is a week or 2; put side was a week or two and has shrunk to 2-5 days.

If I could define a "pucker factor" metric, I would add that. The idea is to measure how much worry each trade creates, with the general idea being that if I'm worried about a trade, then I should just close it - it seems there are plenty of fish in the sea. I followed this rule on my 1 and only losing trade - I closed out about a half hour before Elon said the stock was too high (dumb luck that). Pretty sure that trade would have turned into a winner by waiting it out, but the "pucker factor" had gotten too high before Elon tweeted.

 

[adiggs]

I been going through the Options Alpha modules and I am hopping to start selling options soon. I was wondering if you guys have fairly large accounts because if you follow Options Alpha video on account size adjustments to trade Tesla options you would need a decent size account. I only have 102 shares in my IRA.

A large account (whatever that means to you) certainly increases the range of trades you can make. I define a large account as one with say 200 shares, and enough cash that you can sell 2 puts (about $80k/put at the ($800 range, so $160k cash). Whether that's large or not is for each person to decide for themselves.

Something I've found that really helps my mentality about doing this, is being able to sell both puts and calls at the same time. The consequence is that any day one side is down, that almost certainly means the other side is up. I've seen days where both sides are up (give it up for time decay!) due to low share price move and options being near expiration.


Before I was doing both sides (I started Put side), I started putting too much energy into finding the right entry and exit to improve the premiums and trade results. An important component of my own trading strategy is to minimize the energy and worry involved in any individual trade, as well as overall.


Last note is that relative to OA account and trade size, I'm definitely not using that. Then again I'm trading 1 underlying, and I really don't want 33 open positions on TSLA to keep track of. Or 16 if I'm using 1/2 the account. This also ties back to another important assumption of my trading strategy - I trade the 1 underlying that I know really well, and don't trade on anything else. I've got 4 open positions right now and I suspect that'll be the max and frequently the norm.

 

[adiggs]

Today is a perfect example of why I like selling options instead of buying them. When I buy options, I need the underlying to move in my direction, fast enough to overcome time decay (and IV reduction, and other stuff). So I go for long dated options to minimize the daily time decay, but the same basic dynamic exists either way.

When I sell options though I have days like today where the change in the value of options I've sold nets out to $0. If I'd bought options, that'd be a day passing with no progress towards the options getting into the money. Because I sold the options though, even though today represented no net change in value, I'm also 1 day closer to expiration. Some of those options expire this week, so no change in the underlying is great for me - the options expiring this week will have their time value going to $0 quickly and I'll get ahead, whether that happens today or later in the week.

The options expiring in 2 or 3 weeks don't have the same level of time decay each day, but each day with effectively no movement in the underlying gets me closer to my profit target (even if the option price doesn't change today).

 

[adiggs]

@Lycanthrope @adiggs

I have been watching this thread for a long time but never posted. I have been selling cash-secured puts from last couple of months and really value your posts and commentary. Cash-secured puts have been working till now and I would have anywhere from 2-4 in a rolling fashion, currently in 780 puts expiring 06/05 and 06/12. Great job guys.

You're welcome!

Do you track delta on your put sales, or is there a target delta you use for your sales? Is there some other metric you use to pick your strikes? I ask as delta is a pretty good proxy for the Probability of finishing ITM (Prob ITM). I've only been selling CSP as well the last couple of months, and using a target delta (along with max pain, OI walls, as discussed above) to help me pick strike prices.


One thing I've recommended before is the free training on optionalpha.com. The first track is maybe 10h covering the basics of option trades, with an emphasis on selling options - it made the difference for me gaining enough confidence to get started, and forms the basis for everything I've learned and used since.


I hope we'll see you contribute to the thread, stuff you've learned, your particular approach strategy -- stuff that we might learn and benefit from (that's my standard - do I have something to say that I think will make others smarter if I say it).


And one warning that I mentioned earlier. I think that the last few weeks / month has been a golden era for selling options. The stock price moving very little week to week means that options are expiring OTM in a highly reliable fashion. I try to remember that $100 - $200 moves in TSLA isn't all that hard to come by, though I think they tend to stretch over more than a week. That's one reason to stick with the close expirations - more opportunity to make adjustments and avoid being flatted by a steamroller.

 

[adiggs]

So Monday, with this late in the day price jump, I'm looking to:
- roll my 760 'safe' puts out a week. I'm at about 2/3rds profit on these which seems to be a pretty reliable indicator that there's a better contract available now. In this case, same strike, 1 week later, and I get a credit of $5 (or as I like to think of it, $8 in premium decaying, instead of $3 decaying). Downside - full 2 weeks to expiration (makes me itchy) and possibly a local maxima where waiting a day or two will significantly increase the value (more for new option, while paying less on current option to close = win). Will probably wait until Tuesday or Wednesday, hoping for a pullback / lower share price, and reducing the trading days to 7 or 8.

- roll my 785 'assignment dare' put up to 805 (hold the 6/5 expiration), the new .30 delta strike. This one isn't as obvious as I haven't yet crossed the 50% profit threshold. If the shares come back down on Monday, then this would be off the table. This would be increasing delta from .19 back to .30, which was the delta change last week when I rolled up (I see a pattern forming).


Whatever I don't roll, theta will be taking over next week. This can be fun, as I've had days where the shares move against me and the options in that direction still make money that day (theta > delta that close to expiration ).