Wiki Selling TSLA Options - Be the House

[adiggs]

Well, the position closed for 0.01 as well, although I had offered a limit order of 0.02. Not sure if I will do another trade like this risking some of my long term hold stock for small reward - but it is learning.

Also, Fidelity does not charge a commission for trades like these for pennies. So I paid a commission of 1.30 when I sold the calls, but nothing when it was closed with a buy to close.

I find that my risk tolerance with covered calls is dramatically lower than the put side. I'm selling .15 - .30 delta puts, but get itchy on .05 calls when I have a move against them too far from expiration.


The observation about learning though is the key to me. I started out with .05 delta puts and have been learning for 3 months now. I've been learning about how much risk I can tolerate each side, how to manage (close) positions early so I can open a replacement, and a lot more. The net result is that in a significantly less friendly environment today compared to March, I'm getting about 3x/month over when I started.

I also remind myself regularly that we haven't been through a sharp move up or down during this period, so it's easy to develop a false idea of how badly this can work.

One of the things you can learn is "that was way too nerve wracking - I'm not doing that again".


So far I've learned about max pain and OI walls to spot share price resistance levels, up and down, that will be hard to breach for very short term options (roughly the final 3 days of trading). One method I've used to handle the risk on the call side is I go find the .05 - .08 delta option (usually the next expiration) - and therefore small premium. Then I go compare that to the particularly active strikes, and I make sure I've got 2 OTM active strikes between me and the share price (and go out to the 2nd OTM big strike if needed) AND THEN I go out 1 more strike (thus the 1005 instead of the 1000 strikes for today).

On my list of things to learn more about are Bollinger Bands - this seems to be the key thing that @Artful Dodger uses for spotting the weekly closing price so far ahead (or at least, he seems to be pegging them way better than me, and better than most).

 

[Right_Said_Fred]

Ditto on this (Fidelity and free Buy to Close orders under .65). Except today I thought I saw the message saying that commission free option trades are .10 and under.

The commission free trades are, I think, not unique to Fidelity. Here's eTrade's page:
Dime Buyback Program | E*TRADE

Here's Fidelity:
Trading Commissions and Margin Rates - Fidelity

Where we do have free Buy to Close on .65 options and down.


If I were in @Lycanthrope shoes, I'd have allowed today's options to expire worthless rather than spend the $20 for a trade. But we might also have different constraints on when resources covering 1 trade are freed up for another trade - I would expect them to be ready to go first thing on Monday (I don't bother trading the after or pre market), so expiring worthless is worth avoiding the $20 commission (I paid $4.16 all in for the 4 contracts I bought back at .01, so paying $20 commission on a $4 trade would make me crazy ).

And I'm sure we DO have differing details, not just the commissions, as we're on different continents with different constraints on how we access the US market.

My preference would also be to let the options expire instead of buying them back at the last minute. My bank allows 2,5 x margin so it wouldn’t be a limit on taking up a new position before settlement (I prefer not to use margin, but it’s not an issue if you know the option has already expired).

 

[troyhouse]

So I have 980p and 985p cash covered puts expiring on 07/02, it will be interesting to see whether they get assigned or not. Chances are that they will be assigned, but depends on macro. what do you guys think?

 

[vikings123]

So I have 980p and 985p cash covered puts expiring on 07/02, it will be interesting to see whether they get assigned or not. Chances are that they will be assigned, but depends on macro. what do you guys think?

What is the break even for these puts? I do think we will see another run to the 1000s in anticipation of the P&D report. This particular P&D has so many people interested and excited, the shorts are probably hoping for a bad macro day next week to cover. Maybe buy one and let the other one ride if you are OK to get exercised.

I also feel like we will see the report released either end of day on July 1st or premarket on July 2nd. Elon has been giving a lot of subtle hints over the past few days.

 

[EV forever]

Sold a C1000 yesterday which I let expire worthless today for a cool $245...sadly it's in an IRA account so that'll have to be future beer money. Wasn't really concerned with closing it out early as I was busy checking out the Cybertruck at the Petersen museum.

View attachment 556911

Today was the last day for the cybertruck at the museum, correct? I would have loved to go but was working all week. Last weekend was sold out.

 

[Mokuzai]

Today was the last day for the cybertruck at the museum, correct?

When we booked it it was...but it got extended to July 5th. The whole museum is pretty great, just know the parking will probably run you $17. The parking lot was full of teslas and the museum was full of people wearing tesla shirts...think the cybertruck is doing well for the museum.

 

[adiggs]

So I have 980p and 985p cash covered puts expiring on 07/02, it will be interesting to see whether they get assigned or not. Chances are that they will be assigned, but depends on macro. what do you guys think?

Those sound like right ATM to me - could go either way. I'd bet that max pain is in that neighborhood as well.

Put another way, I can make a case for down, potentially quite a bit (920's?), and I can make a case for up quite a bit by then (1000 - 1020?). And of course, a case for flattish. Which is also usually the case.


I'm being extremely risk averse to the upside, as I think there's a decent chance of a breakout to the upside. So either no covered calls for me, or very short duration and very distance calls (and thus, very small premium).

I'm also keeping in mind that the breakouts happen occasionally. Most of the time when we're trading close to the ATH and the exuberance in the main thread is as high as it is (seems like EVERYBODY is ready and seeing a breakout right now), then what we'll see next is the stock trading down - maybe fast, maybe slow, maybe down and then sideways for awhile, but eventually getting towards the bottom of the trading range. I don't know what that bottom is, but I expect it's under 900.

So to help with a breakout, I'd like to see more caution and reasons from people why the stock is already priced to perfection.


One of the important reasons I think a move downwards, and a big one that can happen fast, is macro. And in particular that there's a big chunk of the economy that isn't working right now, whatever most of us here have personally experienced. The further apart the stock market (financial instruments) get away from the economy (real products and services), the more likely we'll see a reset that brings the financial instruments back into alignment with the economy.

I've also got a $13k hedge on that notion that's down about 90%, so you can see what my view of things is worth

 

[vikings123]

The drop to 940s did not happen but I still
sold one Jul 10th 950 put at the end there for 45$. The only risk I see is the macros but happy to own the shares if I get assigned.

Closed this one for $29.00 for a decent profit of 1600$ . I think we see another dip in the next coming days before the P&D report, at which point I plan to sell another put.

Macros also seem to be hanging in balance. I'm still holding a Aug 21 2020 725 put that I sold a few weeks ago for $45.00 already up 50%, will most likely will let it expire.

 

[troyhouse]

Those sound like right ATM to me - could go either way. I'd bet that max pain is in that neighborhood as well.

Great day, good chance that my 980p and 985p 07/02 puts expire worthless.

 

[adiggs]

Great day, good chance that my 980p and 985p 07/02 puts expire worthless.

Yeah - I rather like today also . I rolled out of a 7/2 put into a more aggressive 7/2 put (now at 965 level - .30 delta), out of a 7/2 put into a 7/10 put (I think that one was .20 delta). The closed positions were around 70% profit.

Then we had the big spike at the end of the day and I ended up with these new positions being solidly green on the day. Another day like today, and I think I'll be closing these positions and opening more aggressive 7/10 positions plus some conservative 7/17 and maybe 7/24 positions (I'd like to get a better feel for how these 'long' expiration puts behave).


I've got no open covered calls right now. I might be opening a position for this week tomorrow or Wednesday, but I think that's the limit of my adventurousness. And most likely I'll just sit out the calls through earnings and maybe beyond. My tolerance for risk is very high on the downside (ooh - I own more shares!) than to the upside (ooh look - I just gave up shares in time for a reset in TSLA valuation -- oops).

 

[pz1975]

I am not going to hold any sold option positions into Thursday (small chance of delivery report Thursday before open) or over the weekend. I have a decent number of positions open now (all green except 1), but will close them all Wednesday afternoon. These are the times (important binary events) that big moves can sink a "wheel" strategy pretty quick. I expect a big move either way and will wait until the SP settles down next week before getting back into sold positions. I may lose out on some profit by taking the safe road, but the risk/reward is too high IMO to be holding sold options after Wednesday.

 

[vwman111]

Is anyone selling July 10 OTM puts in anticipation for a beat on deliveries or $1 profit? Definitely not the traditional option wheel strategy but a chance to increase premium collected with high IV and an anticipated bullish movement in the stock

 

[Chenkers]

My July 2nd 930, 1005 and 1010 sold puts are nicely in profit after this run up. I'll look to close them out either Tuesday or Wednesday depending on how things trade and go long with shares ready for any further run up past Thursday on P&D. There may be a minor dip leading into Thursday with current options volumes suggesting a close a bit under $1000. I'd rather some risk of being long with these shares over the P&D than miss a run up and not be able to sell options with a decent premium later against a higher SP.

 

[adiggs]

Is anyone selling July 10 OTM puts in anticipation for a beat on deliveries or $1 profit? Definitely not the traditional option wheel strategy but a chance to increase premium collected with high IV and an anticipated bullish movement in the stock

Yep. I've got 2 July 10 positions right now, and when the July 2 put position closes, I'm probably going out to July 17 or 24. My thinking of the longer dated put (much longer than I normally write) is to collect that much more premium, so that when (if) we get a p/d beat and a huge jump in the stock price, then I have that much more premium to be wiped out (and thus I keep).

I haven't looked at specifics - I'd probably aim for something in the .15 or .20 delta range (semi-conservative) to get a bit more wiggle room with an option position with that many days to expiration. I can pair that up with a more aggressive put position later when others put positions are closed (I'm keeping 3 positions going right now - I like the mix of strikes and expiration dates this enables).


There are wheels within wheels (sorry - I couldn't resist). My version of the wheel is more theoretical than actual. I'm choosing strikes that are far enough OTM that I don't really want to be assigned, though I'll take it if it happens. Over 3 months / 40 trades, I have 0 assignments so far. That being said, I AM selling both puts and calls, so I'm seeing option sales from both sides - I'm just not also wheeling cash into shares, shares into cash.

Others here are selling options that are closer ITM and getting assigned now and then, so they're doing something closer to what I think most people think of when they think of the wheel.

We're all using the dynamic of:
1) Sell puts (margin, or cash secured - I do cash mysel), collect premium
2) repeat (1) until assigned, at which point
3) Sell calls against your new shares
4) Repeat (3) until assigned, at which point... go back to 1.

to some degree or the other.

And welcome!

 

[adiggs]

My July 2nd 930, 1005 and 1010 sold puts are nicely in profit after this run up. I'll look to close them out either Tuesday or Wednesday depending on how things trade and go long with shares ready for any further run up past Thursday on P&D. There may be a minor dip leading into Thursday with current options volumes suggesting a close a bit under $1000. I'd rather some risk of being long with these shares over the P&D than miss a run up and not be able to sell options with a decent premium later against a higher SP.

I'm betting those 1005 / 1010 puts brought in a big premium. Making the big stock jump today that much sweeter, as those big premiums probably also shrank a lot today

 

[pz1975]

Yep. I've got 2 July 10 positions right now, and when the July 2 put position closes, I'm probably going out to July 17 or 24. My thinking of the longer dated put (much longer than I normally write) is to collect that much more premium, so that when (if) we get a p/d beat and a huge jump in the stock price, then I have that much more premium to be wiped out (and thus I keep).

I haven't looked at specifics - I'd probably aim for something in the .15 or .20 delta range (semi-conservative) to get a bit more wiggle room with an option position with that many days to expiration. I can pair that up with a more aggressive put position later when others put positions are closed (I'm keeping 3 positions going right now - I like the mix of strikes and expiration dates this enables).


There are wheels within wheels (sorry - I couldn't resist). My version of the wheel is more theoretical than actual. I'm choosing strikes that are far enough OTM that I don't really want to be assigned, though I'll take it if it happens. Over 3 months / 40 trades, I have 0 assignments so far. That being said, I AM selling both puts and calls, so I'm seeing option sales from both sides - I'm just not also wheeling cash into shares, shares into cash.

Others here are selling options that are closer ITM and getting assigned now and then, so they're doing something closer to what I think most people think of when they think of the wheel.

We're all using the dynamic of:
1) Sell puts (margin, or cash secured - I do cash mysel), collect premium
2) repeat (1) until assigned, at which point
3) Sell calls against your new shares
4) Repeat (3) until assigned, at which point... go back to 1.

to some degree or the other.

And welcome!

Good summary. I will point out that I am selling puts and calls simultaneously, not usually at the same time, but try to sell puts when the SP is relatively low and calls when relatively high. By the end of the week my strike notices gets closer and closer to the actual SP. I think my strategy is better described as a funnel. I also just keep the cash and don’t buy shares with the profits. I have a large share position I am satisfied with.

 

[EV forever]

I'm betting those 1005 / 1010 puts brought in a big premium. Making the big stock jump today that much sweeter, as those big premiums probably also shrank a lot today

It is surprising how much effect volatility is having. The premium on my 07/24 P995 put has not dropped as much as I would have expected. Sold on 6/24 at 85, even with the run up today has only dropped to 74. During this time volatility has increased from around 60 to 79. I have time to wait it out, so lets hope it drops some more. I usually close around 50% profit.

 

[troyhouse]

So went little aggressive this time. Closed 07/02 980p for 85% profit, and sold 07/10 1020p for quick 4700 premium. Hope it works out.

 

[Mokuzai]

This is starting to look like a buy the rumor sell the news setup...personally staying out of options for this week.

 

[adiggs]

I think my strategy is better described as a funne

This is how I think of my positions as well. When we're inside the funnel, then we're trending to OTM / full retention of the premium.

When we're a little bit outside of the funnel, then we're tracking towards a small amount ITM and then I need to decide to cut the position early (with losses) or let it ride closer to expiration in the hope the position will get back inside of the funnel.


And if we're way outside of the funnel, then I'll probably get assigned. So far, I haven't been that far outside of the funnel.