Closing 06/26 895p for 90% profit, and opening 07/02 985p for 4k.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
I'm liking the way time value melts away on expiration day. Still looking for a bit more push from MM to get those 1000 strike calls green - they're getting close! And still with $3 worth of time value on these options expiring today, though I guess if the stock price was $100, then that'd be $.30 worth of time value remaining on expiration day. I'm hanging on still - at least through breakfast.
pz1975
Active Member
Knowing the SP would likely pin near $1,000 today, I sold some $995 puts and $1,005 calls yesterday. If the SP closes between those 2 levels, I take home $5,400 in free money. I break even if it closes at 978 or 1,022, and lose if it goes below/above there. This stuff is so obvious, especially on monthly expiration or triple-witching days, that it is really like free money. If this works out, it adds to all the other puts and calls I have slowly been selling expiring today (starting way OTM and then working slowly closer to ATM as expiry day got closer) over the last 2 weeks and my total profit will be over $20K just for this one week. I usually take home $2,000-5,000 every week doing this strategy, but the triple-witching aspect and seeing the wall of calls and puts at 1,000 made me more aggressive.
First call I ever sold was a 1000 on Monday.. I bought it back on Tuesday.
The 1100 calls I then sold were a lot less stressful. (less profitable, but dough is dough)
The 1100 calls I then sold were a lot less stressful. (less profitable, but dough is dough)
By the way, for Europeans like you and me it’s mighty confusing that the Americans put the month before the day. I constantly have to do mental gymnastics.
Obviously, the right date format is something like 2020-06-20 (y-m-d) as the dates sort correctly when you have many of them in a list. Therefore in these circumstances where we're not providing the year, as it's obvious that it's this year, that leaves us with m-d as the correct format.
How people with such an otherwise intelligent measurement system (metric) get this one wrong is beyond me!?!
/silly
I'm a big fan of starting really slow and really conservative - start getting a feel for how things work, educate yourself outside of the market, and ease into your activity. I started back in march ridiculously far OTM with some puts (200 and 175 strikes, when shares were in the low 400s). The IV was so high on those, that those trades are still my most profitable individual trades (I had no meaningful clue what I was doing, but I'd been learning, was ready to get started, and went way conservative).
As you say, dough is dough, and I've found that with repetition, I'm being paid to learn market dynamics. Best paying education I've ever gotten.
I like this idea - at least for the monthlies and bigger expirations. You make your decision the day before on where you think the price will pin, and sell the straddle at that point?
I'm trying to get better at identifying the pin points, and like to learn how people spot those points. In this case you fixed on the very high level of both puts and calls at the same strike.
This trade strikes me as interesting as I frequently find 3-8 day trades closing on Wednesday or Thursday. I could use this instead of going out to the next week. H'mm - I'll need to start watching for this trade.
And I really do like what time decay does to option premiums on the last day
Can you please provide some additional details and examples for us newbies. I have started selling puts recently from last 2/3 months, and would love to get some more details to refine my execution as well.
It's stabilizing.
Our trading account is more of a cash reserve at this point, so, rather than let is sit, I sold off the shares and used the cash to sell a 975p for next week. Worst case, I end up with shares for 955.
(also made $30 on that dip... Woooo
)
I show max pain today at $920, with a 1% near pain range of 895 - 945.
As we're around the 1000 range today, I show the 995 strike as $44M lower than the 1000 strike, and the 1005 strike as being 54M more than the 1000 strike. I interpret that to mean that there's more incentive to finish just under 1000 than just over. And the strike to strike gap grows beyond 1005.
Relative to max pain, the 1000 strike is 14% or $352M away - I think that's out of range today, but getting under 1000 will ease some of that pain
(Pain being, in some ways, such an odd term for market makers that I believe brought in a LOT more than the $2.3-2.7B that we're talking about here)
As we're around the 1000 range today, I show the 995 strike as $44M lower than the 1000 strike, and the 1005 strike as being 54M more than the 1000 strike. I interpret that to mean that there's more incentive to finish just under 1000 than just over. And the strike to strike gap grows beyond 1005.
Relative to max pain, the 1000 strike is 14% or $352M away - I think that's out of range today, but getting under 1000 will ease some of that pain
(Pain being, in some ways, such an odd term for market makers that I believe brought in a LOT more than the $2.3-2.7B that we're talking about here)
It's stabilizing.
Our trading account is more of a cash reserve at this point, so, rather than let is sit, I sold off the shares and used the cash to sell a 975p for next week. Worst case, I end up with shares for 955.
(also made $30 on that dip... Woooo
Very similar to the decision we made back in March. Had a big cash reserve account that we didn't like just sitting there earning 0.1% or whatever it was. Decided to start selling some puts with the hope of generating 1% / month as an outstanding dividend.
And now that I'm into this, I like the dynamic of having a somewhat hedged TSLA portfolio. Today the shares are down $5.81, but the overall account is ahead more like $2 (relative to the core shares). That isn't a typical relationship, but today is expiration day and there's a lot of time premium that needs to decay in the next 3 hours.
Yeah, I'm feeling dumb for not having sold way OTM calls against the shares we've been sitting on for years...
Such is life: learn, change, move forward.
Though now that you remind me that Max pain for today is not 1,000 ... I'm second guessing myself.
Edit: Yeah, pulled back the put to see how the rest of today goes. Ever since the 4 day Memorial day week caused me to get labeled a day trader, I'm much freer to reverse myself.
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One reason I stay more than not from the mega-thread is that there are so many different trading strategies represented. You get topics with people arguing with each other, and they're all correct.
Of course, I too can do a better job of taking my long term, buy hold, strategy, and long term execution observations and information to the long term thread instead of keeping them to myself or taking them to the mega thread.
Maybe that'll be my mid-year resolution!
By the way, for Europeans like you and me it’s mighty confusing that the Americans put the month before the day. I constantly have to do mental gymnastics.
Well we all know that Americans are freaks - present company excepted, of course...
And let's not get started on imperial versus decimal
I think the show's over folks. nevertheless I'm happy to be having $1005 strikes, not $1000 - word of advice there, got one notch above/below the consensus...
Don't forget to buy/sell your expiring contracts for $0.01 before close, get them off your account...
I'd have been happier with the 1005 strike, but so far it looks like the 1000 strike is going to work out. I've seen those options go from -300% to +70% today. In fact, I think that today is the only day in the last 15 days these options have been open where they've been green.
Two lessons from that - time decay is a powerful friend. Time decay is my new best buddy.
Second lesson - on the call side, I want to be more conservative. I opened that position at a .15 delta for an 11 trading day option. I got a decent premium at that duration for a call, but way more interesting than I wanted that to ever be. Especially in front of what I think is going to be a big pop next week.
Third lesson - triple witching day can be our friend, as it's a lot easier to spot pin prices weeks in advance, instead of needing to wait to Wed or Thurs of expiration week to have meaningful volume from which to derive insight.
The "I dare you to assign me" puts for today (from yesterday) closed out at $0.50. I put in that order with that high of a closing price as I wanted those to close earlier in the day so I'd have time to open new positions for next week or two.
Opened a conservative put position for next week at $935 (.20 delta - things sure have changed for me where that's conservative
), and an aggressive put position for July 2 at $945 (.31 delta). That leaves me with an aggressive position for July 2, and an aggressive plus conservative position for June 26.And the two 1000 strike calls for today are still open, with no plans to open replacement covered calls for at least 2 trading days. So I'm watching them closely, and letting time decay take out as. much of the last $2 as I can stand.
An interesting observation to me, that others might find interesting / educational.
We're 1h45m away from the close of the market, and $6 below my 1000 strike calls (so $6 OTM). That's 0.6% OTM with <2h to expiration, and the time value is still over $1.50.
I'm amazed at how long these have held on to meaningful value. If the shares went back up $3, I'm pretty sure the option premium on these would go up, even though the time values goes to $0 in <2h.
We're 1h45m away from the close of the market, and $6 below my 1000 strike calls (so $6 OTM). That's 0.6% OTM with <2h to expiration, and the time value is still over $1.50.
I'm amazed at how long these have held on to meaningful value. If the shares went back up $3, I'm pretty sure the option premium on these would go up, even though the time values goes to $0 in <2h.
Who'd'a thought that there is actually an internationally agreed date format?By the way, for Europeans like you and me it’s mighty confusing that the Americans put the month before the day. I constantly have to do mental gymnastics.
ISO 8601 — Date and time format
Still following this along... now spot at 1000.00 (so 0.01 OTM) and time value is $2.54 with 39 minutes to go.
I should probably just close the position and be done with it (roughly 2/3rds profit), but I'm finding this educational to still have skin in the game and watch how this evolves. There is 2.54 of time value that disappears in the next 39 minutes - that's just amazing to me.
pz1975
Active Member
I like this idea - at least for the monthlies and bigger expirations. You make your decision the day before on where you think the price will pin, and sell the straddle at that point?
I'm trying to get better at identifying the pin points, and like to learn how people spot those points. In this case you fixed on the very high level of both puts and calls at the same strike.
This trade strikes me as interesting as I frequently find 3-8 day trades closing on Wednesday or Thursday. I could use this instead of going out to the next week. H'mm - I'll need to start watching for this trade.
And I really do like what time decay does to option premiums on the last day
I definitely make more trades leading up to Fridays of "significance" (triple-witching, monthly), but I do this every week. If it appears obvious what the pin will be (like this week with a giant flashing neon sign), I will be way more aggressive and sell a tight strangle like I did. Normally I wouldn't sell a strangle only $10 apart in strike prices but this week was really an outlier with an obvious $1,000 pin.
My general strategy is to have a feel for a likely trading range and start by selling way OTM puts and/or calls 1.5 weeks ahead of expiry. For example, I sold $800 and 850 puts and 1,200 and 1,300 calls early-mid last week. Once this week started and very likely seemed range bound between 950-1050, I started selling 900 puts and 1,100 calls Monday and Tuesday. Then as Wed and Thurs progressed and the likely range closed, I started selling 950 puts and 1,050 calls. Yesterday I sold 995 puts and 1,005 calls but I don't normally take chances like that. I keep my deltas really low but slowly add to my position as the initial sales from the week before basically become 100% that they will close OTM. Even today I sold some 980 and 990 puts and 1,020 calls through the day, each time pocketing another $400-800. Do this enough times and the profit really adds up.
I guess the point is I never close the OTM options I sold knowing they are almost zero chance of becoming ITM (exception is the ones within $10 of the closing strike price since I learned the hard way before that those can get exercised after close). As they get to that point of almost 0% chance of becoming ITM, I then keep slowly selling more OTM options (puts and calls so any move one way is partially offset by the options sold the other way). And the closer it gets to Friday at close, the closer I sell to the SP but the deltas typically remain very low for every sale.
For next week, for example, I have already sold some 850 puts and 1,200 calls and consider both of those very unlikely to become ITM. That's already $2,400 pocketed and again I will add more as next week progresses. If there is a big move, I stop doing this and wait and sometimes have to close out a position at a loss. I never sell puts or calls if a big move is underway. I did sell some $980 puts for next week but that is because I expect a move up next week. I may use the proceeds from those and buy some $1,020 calls - but again this is not my usual strategy, I just expect an upward move next week.
I am going shopping again now 30 mins before close to sell some 990 puts and 1,010 calls if it looks worth it.
And the $1 fill with 11 minutes to go. Stock move slightly OTM and then back slightly ITM and that was all it took (pennies or dimes in each direction). Time value had finally gone below $1 about 12 or 13 minutes to go with a slight ITM share price - option premium was moving more than the stock price, mostly because of intrinsic value being ITM.
I think that $1 fills are as tight as I'll ever do this again (good thing to learn) when I'm right up against expiration. The .65 fills when options melt away the day before - I'll take those. But day of, probably aim for $2 fills as the most aggressive fill, or whatever it takes if I'm further OTM. An excellent education and it paid off in pennies! I like education that pays (instead of needing to be paid for).
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