I was worried about aggressive put, but I am already 40% up and on the other put another 15% up. this is crazy.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
I was worried about aggressive put, but I am already 40% up and on the other put another 15% up. this is crazy.
I've closed my 3 put positions for 70% and 85% gains. Opened a 7/10 and 7/17 position, and looking to open YET ANOTHER 7/2 position.
I agree that it's crazy. Owning calls would almost certainly yield bigger gains, $ and %, but I'm much more comfortable selling puts in this situation, even if it's not taking full advantage of this move. I've got a bunch of shares that ARE taking advantage, and I've seen too many head fakes to buy into this with calls.
That being said, I might try a call purchase that is much shorter term (say 6 months) designed to take advantage of what I hope will be a large move upward (much bigger than what we've seen so far).
I agree, I have many many calls expiring 2021/2022, but selling puts is an excellent way to keep "dry powder" and still earn premiums on it.
pz1975
Active Member
I felt the funnel was going to be tight today so I bought back my 1,050 and 1,100 calls yesterday after seeing the leaked email. Loss of $1,000 but very happy to have done so with the big move today. Still have all my sold puts for the week and some 1,200 calls. I prefer to take a proactive small loss rather than hoping for a return into the funnel if a big movement seems imminent or is happening. I should still profit from my funnel $4,000-5,000 this week despite the big move to the upside. I will close those 1,200 calls if the SP gets to 1,150.
I started trading in earnest two weeks ago, with a a buy of 400 shares and a sale of 4 calls en 6 puts. I didn't trade for two weeks, but that changed today:
- Sold 400 shares @1077 (had bought those two weeks ago @985)
- Bought back 4 calls 1050 for 17 July @7300 (had sold those two weeks ago @5300)
- Bought back 2 puts 1000 for 10 July @3350 (had sold those two weeks ago @7600)
- Bought back 4 puts 985 for 17 July @3990 (had sold those two weeks ago @8000)
- Sold 6 puts 1030 for 24 July @8010 (stock was at 1027 at that time). They are now trading @5850.
- Sold 4 puts 1020 for 24 July @5500 (stock was at 1077).
Total cash gain in two weeks was 124k.
I'm comfortable with my current position of 10 puts. Let's see where the P&D report brings us.
- Sold 400 shares @1077 (had bought those two weeks ago @985)
- Bought back 4 calls 1050 for 17 July @7300 (had sold those two weeks ago @5300)
- Bought back 2 puts 1000 for 10 July @3350 (had sold those two weeks ago @7600)
- Bought back 4 puts 985 for 17 July @3990 (had sold those two weeks ago @8000)
- Sold 6 puts 1030 for 24 July @8010 (stock was at 1027 at that time). They are now trading @5850.
- Sold 4 puts 1020 for 24 July @5500 (stock was at 1077).
Total cash gain in two weeks was 124k.
I'm comfortable with my current position of 10 puts. Let's see where the P&D report brings us.
That sounds like a significant improvement in the cash!
The two things I try to keep in mind are tail risk to the upside, and tail risk to the downside. We minimize the possibility of tail risk to the downside, but anybody that's been around for awhile knows that a $900 share price can turn into $400 pretty fast, as can a $300s share price turn into $180 pretty fast.
If that were to happen (downside tail risk) on that scale, will you still be happy, or will a margin call be a big problem (this is why I don't do margin btw)? I personally think that any big move down will result in me owning more shares, and that's not the end of the world. I've held from $350s down to $180s and not even had the thought go through my brain about whether to sell or not. So if we went down to $500 from here, I'd be disappointed that I missed out on the cheap share price, but that's about it. I wouldn't even be that disappointed because I don't feel like that move is likely enough to put any money on it, so there isn't anything I know right now that I know I should be acting on to take advantage of that move.
To the upside, well, that's why I'm not selling calls right now. I'm managing that upside tail risk by getting out of the way right now. (As it seems you are, and as it seems many of us are doing). But I'm also thinking about it, and that's why I'm selling .20-.30 delta puts, and (when I am selling them) .05-.10 delta calls.
The 3rd 'risk' that we're all experiencing right now, is that this big move today ($70) isn't worth $70 to us as put sellers. We're collecting $5-$50 or so from the different posts by people. I know I'm closer to the $10-$15 range from this $70 move. If I'd known yesterday we had this kind of moving coming today, then clearly I'd have bought some calls or something. Or even just shares.
But I didn't know it, and figured it'd take more like a week or 2 to earn the premiums, instead of earning them in 1 day. And I have a bad history with buying calls. And I'm having a great experience selling options, while also realizing that I'm leaving some money on the table relative to buying calls or even shares.
So tradeoffs. This is why strangles / option sales doesn't perform as well in a market situation where the share price is moving in a direction, fast / significantly.
Had to bring my sell price down, but I'm also into that 7/2 position now, making this the 3rd 7/2 position I've been able to use this money to open.
And the way this is going, I might be closing this position tomorrow or Thursday, and then selling a 4th 7/2 position (I'm finding that I like last day put sales - it certainly resolves fast!). We'll see if there's enough move left this week to be worth a 4th position that expires this week.
I don’t use margin, so if those 10 puts get exercised I have the cash to cover them. And I don’t mind if they get exercised, although ofcourse the preferred outcome is that they expire or can be bought back a lot cheaper.
There’s no extra risk compared to just holding shares, which is what most people do. And if the puts get exercised after, say, a drop to 800 or lower (not my expectation), I will sell calls 1020 and 1030. Even then those will still provide a decent premium. Such a relatively ‘dry’ period may last a while, but not forever as Tesla has so much going for it. So as soon as the stock goes up and those calls get exercised, the wheel starts turning again.
I would be less comfortable using this strategy with other stocks with high option premiums like BYND, SNAP and SHOP, at least for now. Those stocks have a higher risk profile in my opinion.
There is a subtle 'risk' though many wouldn't think of it as risk. Namely, you have put sale positions for which you collected some amount of premium. To keep things simple and approximately contextual, I'll make up an example.
If you sell a 1000 strike put and collect $20 in premium (an option that's been available recently, but not today
), then one of the risks you're taking on is the share price going up a lot. Again as an example, let's say the share price runs up to $1200 by the time that put expires. You'll keep ~all of the premium ($20), but you're missing out on the $200 share price increase. That's what I mean about upside risk in the context of puts. It is a 'good' risk in the sense that this is a risk that won't keep most people awake at night - it's really really safe (in my made up example). But it might be a larger risk than others, as this risk is one that can hurt gains the worst of all (by missing out on a big break out). Of course, if you also have shares (or calls, or other unlimited upside exposure) that is big enough for you, then bigger prices are a good thing
I manage that upside risk by owning enough shares that I'm quite content with that happening. In fact, I have enough shares that I'm quite confident that retirement works out soon, and works out well, if I don't do anything else but check in once or twice a year on the share price. So I have that upside exposure. I've even begun thinking (last few days) about adding upside exposure in the form of some long dated calls (June 22) and possibly short term calls - say Oct '20 (so I have 2 quarterly earnings in the window). Or maybe I go really short - say Aug calls - and then buy more calls for Oct later if / when that makes sense. H'mm...
Anyway in the extreme alternative, if your only exposure to the upside are puts you've sold, then your exposure to the upside is quite limited. Hopefully that makes sense.
Yeah - I rather like today also
Gotta love having new positions today already being up 10%, after opening these positions yesterday. Makes my head spin (in a good way).
(And yes, I realize I missed out on $70 in growth today in order to get $10-30, but I wouldn't have bought either shares or calls yesterday using what I knew them, so I beat the <<1% annual interest on cash I would have otherwise earned
pz1975
Active Member
For those of you that may remember, 4-6 weeks ago I had a situation where I had sold calls that expired OTM exercised by the buyer after hours (even though the strike price was above the closing share price) and I ended up having to buy the lost shares on the Monday at a higher price than I had sold them (the SP went up Monday morning). This turned out to be a very rare, but totally doable, option play where the buyer has 30 minutes after close to exercise a bought option even if it expires OTM.
I was thinking about this week's delivery report and have decided I am going to attempt the same strategy in reverse. If the delivery report does not happen Thursday morning before market open (I will be buying cheap OTM calls and puts Wednesday before close to play that as well), I am going to buy essentially worthless calls and puts just before close Thursday for $0.03-0.05 each at strike prices just above and below (respectively) the closing stock price for the week. I should be able to pick up 20 of each for probably $150-200 total. If the delivery report happens soon after the closing bell and the stock price moves significantly in either direction after hours, I will immediately call my broker and exercise the now very valuable calls or puts. I can sell all my shares at the closing share price if the after hours SP drops a lot and then buy them back Monday cheaper for a large profit. Conversely, I can buy more shares (up to my maximum buying power) at the closing price if the after hours SP rises a lot, and then sell them Monday for a big profit.
The risk here is if the SP moves the opposite on Monday compared to Thursday after hours but I don't see that happening unless new news or a big macro event happens over the weekend.
EDIT: Make sure you check with your brokerage first before attempting this - ask if they will allow it. I called mine today and they do allow it (iTrade in Canada).
I was thinking about this week's delivery report and have decided I am going to attempt the same strategy in reverse. If the delivery report does not happen Thursday morning before market open (I will be buying cheap OTM calls and puts Wednesday before close to play that as well), I am going to buy essentially worthless calls and puts just before close Thursday for $0.03-0.05 each at strike prices just above and below (respectively) the closing stock price for the week. I should be able to pick up 20 of each for probably $150-200 total. If the delivery report happens soon after the closing bell and the stock price moves significantly in either direction after hours, I will immediately call my broker and exercise the now very valuable calls or puts. I can sell all my shares at the closing share price if the after hours SP drops a lot and then buy them back Monday cheaper for a large profit. Conversely, I can buy more shares (up to my maximum buying power) at the closing price if the after hours SP rises a lot, and then sell them Monday for a big profit.
The risk here is if the SP moves the opposite on Monday compared to Thursday after hours but I don't see that happening unless new news or a big macro event happens over the weekend.
EDIT: Make sure you check with your brokerage first before attempting this - ask if they will allow it. I called mine today and they do allow it (iTrade in Canada).
This is going to be interesting to read about
. It all sounds internally consistent to me. The imagination / cleverness that yielded this idea is impressive to me.And further evidence for why I'm not going to risk a near ITM option going to expiration
I closed my three 2/7 Puts last night for a 92% profit overall. In retrospect I should have closed them earlier at a loss and bought shares to capture the bigger move up. As it is I'll look for any further dip tonight and buy shares to cover the P&D period then look to get back into options once it settles.
And the best part (*) - since they're cash secured puts, I earned a day of that <<1% annual interests too! How awesome is that!?!
(*) And by 'best', I mean probably not even in the top 10, but hey - it's a good thing anyway.
There is a subtle 'risk' though many wouldn't think of it as risk. Namely, you have put sale positions for which you collected some amount of premium. To keep things simple and approximately contextual, I'll make up an example.
If you sell a 1000 strike put and collect $20 in premium (an option that's been available recently, but not today
That's what I mean about upside risk in the context of puts. It is a 'good' risk in the sense that this is a risk that won't keep most people awake at night - it's really really safe (in my made up example). But it might be a larger risk than others, as this risk is one that can hurt gains the worst of all (by missing out on a big break out). Of course, if you also have shares (or calls, or other unlimited upside exposure) that is big enough for you, then bigger prices are a good thing
I manage that upside risk by owning enough shares that I'm quite content with that happening. In fact, I have enough shares that I'm quite confident that retirement works out soon, and works out well, if I don't do anything else but check in once or twice a year on the share price. So I have that upside exposure. I've even begun thinking (last few days) about adding upside exposure in the form of some long dated calls (June 22) and possibly short term calls - say Oct '20 (so I have 2 quarterly earnings in the window). Or maybe I go really short - say Aug calls - and then buy more calls for Oct later if / when that makes sense. H'mm...
Anyway in the extreme alternative, if your only exposure to the upside are puts you've sold, then your exposure to the upside is quite limited. Hopefully that makes sense.
You’re correct in your observation that there is a subtle risk in missing a big move up when you’re selling puts. But that risk mainly exists with very short term puts (less than one week to expiration) that don’t provide much premium. I’ve noticed that the risk is much smaller with longer dated puts (3-4 weeks). When I started testing my strategy with 2 puts in April and May and the stock moved from 750 to 950, I was able to roll my position to higher strikes several times and get the same result as just owning the shares (with this difference: I would have also made money if the stock had not moved much).
And I believe just holding shares also has a subtle risk: you can see much or all of your gains melt away. The gains are paper gains until you sell, and most of us don’t (or at the wrong time). That’s the advantage of this strategy: you ride the sentiment up and down and collect premium, instead of being at the mercy of sentiment.
I still have core shares but I don’t want to be only dependent on those and on the whims of the market.
There is a subtle 'risk' though many wouldn't think of it as risk. Namely, you have put sale positions for which you collected some amount of premium. To keep things simple and approximately contextual, I'll make up an example.
If you sell a 1000 strike put and collect $20 in premium (an option that's been available recently, but not today
That's what I mean about upside risk in the context of puts. It is a 'good' risk in the sense that this is a risk that won't keep most people awake at night - it's really really safe (in my made up example). But it might be a larger risk than others, as this risk is one that can hurt gains the worst of all (by missing out on a big break out). Of course, if you also have shares (or calls, or other unlimited upside exposure) that is big enough for you, then bigger prices are a good thing
I manage that upside risk by owning enough shares that I'm quite content with that happening. In fact, I have enough shares that I'm quite confident that retirement works out soon, and works out well, if I don't do anything else but check in once or twice a year on the share price. So I have that upside exposure. I've even begun thinking (last few days) about adding upside exposure in the form of some long dated calls (June 22) and possibly short term calls - say Oct '20 (so I have 2 quarterly earnings in the window). Or maybe I go really short - say Aug calls - and then buy more calls for Oct later if / when that makes sense. H'mm...
Anyway in the extreme alternative, if your only exposure to the upside are puts you've sold, then your exposure to the upside is quite limited. Hopefully that makes sense.
I think most of us here doing these weekly trades have the same - a core account of shares that gets added-to as-and-when (in my case by selling "safe" covered calls), and a trading account to play about with. In my trading account I also have LEAPS, which are even more advantageous in the case of a sudden price rise.
And to put into context, 75% of my $TSLA was bought in Feb 2016, so my average is below $200, and the core account is now roughly 5x the original investment. But hey, my trading account was 100x the value yesterday, since September. So regardless of what some (in another forum thread near you) might say, buying and holding isn't necessarily the best method for wealth creation.
On another note. I have been trying to work out what's the best strategy with LEAPS - buying as far out of the money as possible and leaving alone, buying ITM and rolling, etc. I looked up the current prices for some recent trades to get an idea if I'd done the right thing, or not.
If I had held onto the 10x Jun 2022 $1400 strikes that I bought for $45 each during the C19 dip, I would be up another $100k or so. But I traded those to cash when then hit 300% because I thought stocks would fall again, which never really happened. So here it would have been a lot better to hold them, but I was mitigating a perceived risk at that moment.
Bought 4x Jan 2021 $875 in March, just as C19 was hitting when the SP was $750 I rolled into June 2022 $1250’s a few weeks back - sold, then bought for the same price (although the SP dropped a bit) - $257.50, are now priced $311 & $317, so the $1250’s worth more, with more room to grow and less risk. So in this case slightly better (not sure the difference is significant enough to matter).
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I think that is true, and I'm hoping to prove that over the next years with a seperate column in my trading spread sheet: it shows how much the account would be worth if I had simply bought shares at the start of trading two weeks ago, when SP was at 985. Those shares would now be worth 20k less than the current cash balance in the account.
I'm interested in learning more. For this sort of approach, how do you choose the strike for your initial sale and later sales? I ask because I've been wanting to test some longer dated options, but haven't figured out how I would approach it.
I looked at the July and August monthlies (about 2 1/2 and 6 1/2 weeks away). One benefit of going out so far is that the .30 delta is a pretty low share price: 1025 (July) and 985 (August). Or would you start off further OTM: the .20 delta is 985 and 895.
After all - one of the put positions I opened yesterday is ALREADY past 75% of the premium earned today.
I'm doing something I have not done in a long time for the Q2 P&D report. I bought a couple of July 2nd 1100 puts as insurance for 8.90 each. I also have a bunch of calls expiring in 2021, not touching those but I think there is value in buying some insurance this time. Expectations are too high.
edit: insurance is probably the wrong word to use for this scenario but you get the point. Cheers
edit: insurance is probably the wrong word to use for this scenario but you get the point. Cheers
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