The last couple of posts are particularly outstanding examples of the sort of stuff I was hoping to get exposed to in this thread. And I certainly wouldn't have been exposed to otherwise.
Applying options strategy 'the wheel' to TSLA
- Thread starter adiggs
- Start date
I rolled my final Nov 20 position, 385 puts, out to December 370s. The closing position netted ~80% and the new position is around $12. These Decembers are my nearest expiration now.
I don't really have any particular views on what will be happening in the market that lead me to this change today. Mostly this gets me out of a pretty small position with not very much value left to earn (~$2) and into a new position with more value to earn.
I also entered a new covered call position, December 560s, for around $2.40. I don't believe that this strike is reachable in this time frame. I do see today as being less ideal for opening the position, but I tend to value time in the market over waiting for 'ideal' entry points. Thus I prefer opening at what I think is a bad time, in order to avoid the risk that the available entry gets even worse from here.
I don't really have any particular views on what will be happening in the market that lead me to this change today. Mostly this gets me out of a pretty small position with not very much value left to earn (~$2) and into a new position with more value to earn.
I also entered a new covered call position, December 560s, for around $2.40. I don't believe that this strike is reachable in this time frame. I do see today as being less ideal for opening the position, but I tend to value time in the market over waiting for 'ideal' entry points. Thus I prefer opening at what I think is a bad time, in order to avoid the risk that the available entry gets even worse from here.
I almost bought back my Nov 20 380p this evening. Didn't get the strike I was hoping for, will look again tomorrow. Let Theta do a bit of it's thing overnight, I guess.
Incredible how the SP has been walked around the 470 wall today. A Monday. When usually we see a gap up, especially on some decent news.
Max Pain for 11/20 at 400. Early in the week, so this will change for sure. Don't understand the SP at the moment.
I need IV to go up so that I can feel better selling covered calls - will probably stay on the sidelines after getting rid of my 380p...
Incredible how the SP has been walked around the 470 wall today. A Monday. When usually we see a gap up, especially on some decent news.
Max Pain for 11/20 at 400. Early in the week, so this will change for sure. Don't understand the SP at the moment.
I need IV to go up so that I can feel better selling covered calls - will probably stay on the sidelines after getting rid of my 380p...
...whelp..... with S&P now confirmed, I hope your December 560c prediction doesn’t turn on you....
crazy week
crazy week
Xepa777
Member
With the IV spike that's going to come from this, would selling $800 strike calls be viable again? lol
Heh - not aging well
.Up $53 / 13% in the after market with the S&P 500 announcement.
those new puts though! rock on
Heh - not aging well
Up $53 / 13% in the after market with the S&P 500 announcement.
those new puts though! rock on
Do you plan on continuing with the wheel strategy with this potential S+P rally? Does seem like IV will increase too.
Thus far I have only been doing the call-selling side of the wheel but looks like I'm about to get my feet wet on the put-selling side.
(Great thread btw, thanks)
ggr
Expert in Dunning-Kruger Effect!
I have a feeling that tomorrow will be one of those days when people regret writing covered calls. Of course, if you wrote puts, you are laughing. I bought back all my covered calls last friday, phew.
LN1_Casey
Draco dormiens nunquam titillandus
I put in an order to sell one for $540 strike at $10, a price that I can sell the single call and get my car. Dunno if the IV will pop enough to catch it, as it's for this week closing, but I'd not regret it if it did.
Though I was thinking of starting to sell some for the upper 400's, since we've been floating about that range for so long! Haha. Good thing I didn't.
I did the same luckily. Unfortunately, I don’t even have enough free cash in my options account to write a single put.
I have a buy order in for Jan 23 LEAPS, but I was hoping for a SP pullback and put in a lowball limit order. That definitely won’t work now. I’ll try to buy some Dec calls, but will have to be quick and probably pay through the nose. That’s the problem with being low on cash.
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pz1975
Supporting Member
I have some sold calls and will take my lumps and buy back with losses at open. This is part of the strategy. Fortunately my sold calls over the next 4 weeks are all quite OTM (lowest is 500) so the losses won’t be bad. They will be offset by the higher number of sold puts I have and the bank of profit from previous weeks. I find the strategy profitable ~80% of weeks.
Also my core share position and LEAPS I have been accumulating will be way up so overall it will still be a major positive.
Also my core share position and LEAPS I have been accumulating will be way up so overall it will still be a major positive.
As mentioned, I bought 400 shares at 460 to hedge my 800 calls expiring in March. Im half scared, half excited to see where this goes next. Good luck gentlemen.
This is why I like selling weekly calls, far OTM and only sell if the premiums make sense... I guess I got lucky. I have no calls opened and I am actually thinking on opening a few for this Friday. I wonder what strike will be safe for Friday
. I am also thinking about buying some short term calls with the premiums that I have collected before the IV gets crazy. @bxr140 do you have any plans for the S&P inclusion?
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Discoducky
Happy owner of a P100D X and a brand new 2021 M3!
Same here, I wonder if I can get out of my CC's while holding onto some of my premiums? We'll see.Planning on rolling up (strike) and out (expiration) of some covered call positions. Going to be a busy morning
But also actually interested to see how they are called away, as I haven't experienced this before. This is actually the first time they've been ITM with more than a week to expiry (it's borderline actually as they are 455 Nov 27th calls).
It's exciting either way as I'm happy to sell these shares as I watch my core shares go up!
Short answer, yes. I would rather not have sold those calls yesterday, but hind sight is 20/20. Given what I knew then and why I acted, then yes, I still would have acted. The S&P 500 inclusion might have happened now, and it might have happened a month ago, or a month from now, or a year from now. I AM in the camp that sees the inclusion as being inevitable, and increasingly important to the index (and correspondingly less important to Tesla).
I decided that I couldn't let that freeze me from acting - there is pretty much always something.
I DID decide to close that position today with a loss (sell 2.40, buy 8.40). With the S&P news and the month to expiration, I expect the price to be significantly higher by then than now, and I don't see a good reason to stand in front of that train. I didn't think 560 was reachable in the next month and could still be proven right, but I DO consider it to be reachable today.
That's the only position I'm unhappy with this morning. The December puts are looking very good - not so good as to get a 1 day close, but well on their way to an early close. The two longer positions are so far distant in time and strike that today's news and move are still in the noise category.
This is why I like selling weekly calls, far OTM and only sell if the premiums make sense... I guess I got lucky. I have no calls opened and I am actually thinking on opening a few for this Friday. I wonder what strike will be safe for Friday
I end up selling 6 520s for Friday between $2.7-1.9. I was not able to purchase any calls.
First up - not advice; we all make our own decisions and live with the consequences (good and bad).
Thinking more about the inclusion and the dynamics I expect around it, I've decided to join in the front running of the index buying by buying some calls - something I nearly never do. I've gone for two positions - one closer (12/4 500s) and one further (Jan '21 700s). The 700s are partially chosen with the hope that they will close in '21 and move the tax impact into next year.
I may do some more, but the underlying dynamic I see will be the same.
This S&P 500 inclusion is going to have an effect on short term trading (duh
). The specific dynamics I see:- index funds (the ones that have licensed the index, and specifically 'trade' to match the index) will be buying a significant number of shares in the mid/late December timeframe. I've seen an estimate of 15% of the company for these (I can't attest to the truth of that though).
- benchmarked funds - the rather large universe of actively managed funds that benchmarked their results against the S&P 500 will need to buy into TSLA if they aren't already. In effect, a choice to own less TSLA than the index funds is a bet that they can outperform by owning less TSLA (and vice versa). This direct impact will cause buying to happen in this world.
- The actively managed funds also have the ability to front run all of this share buying - buy now (as many of us are doing, including me with those call purchases), let the programmed buying happen, and sell into that programmed buying.
- The rest of the investing world can front run as much or as little as they choose to do.
- We saw what the market can do to a very large and telegraphed move in the market when the near month oil contract went briefly negative back in May.
- (Side effect): I expect the S&P to spread out the buying as they talked about. I also expect them to change how they announce these inclusions in the future.
EDIT to add:
- Anybody short TSLA might decide that they don't want to stand in front of this train - even more buying (though I don't trust any sizing I can do on this).
- And \lastly, I expect that hot / front running money to promptly disappear when the index buying is done (or to front run the exodus!); I wouldn't be surprised if we're back near this level by mid-January.
Lots of ways I can be wrong in this - I am pretty much always wrong about <3 month direction and magnitude of share price movements. I do feel strongly enough about this though to take advantage of this setup, as I nearly never do.
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