Awesome! I've been looking for exactly that for quite a while, but never quite found it. Thx.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
I would have liked a little more analysis/context from that article. As noted it is most likely hedging, but still, even if it WAS the same trader making those four positions that add up to a max of $44M, its a bit misleading.
Still, its interesting to case study the positions all the same in an effort to better understand the positions we're taking. Take the first one: 310x Sept $260 calls. Yes, $15M is the max profit one can make on the trade, but that's certainly not what the trader is going for. Hedging aside, what the position really is looking to capitalize on is primarily ∆.
∆ on those right now is .98, which means each contract moves just about as fast as 100 shares. We know that generally a sold option is not a great directional trade as ∆ moves unfavorably in both directions, but...this extreme case pretty much nullifies that phenomenon. ∆ only has two cents to go in the "wrong" direction (if underlying moves up), which is all but a non-issue especially because gamma is effectively zero way down there, and even if TSLA dumps like 25% that's only going to reduce ∆ to maybe .90-.92, which is pretty minimal unfavorableness considering the total impact that underlying move would have on the position value. In other words, this position basically turns the "selling options to capitalize on ∆ is not a smart idea" approach on its head.
And again turning selling options on its head, volatility only plays a small part in contract value on this one. Because the strike is so far away from the money, Vega is quite low even for a far expiration and IV is only going to move a few percentage points even with big moves in underlying...and so those rack up to pretty low $ impact for volatility movement in either direction.
Created an account only to find that I can't use it on Chrome. Ugh, going to have to try the Linux version
LN1_Casey
Draco dormiens nunquam titillandus
Well, I resold the call this morning. Unfortunately I was asleep when it peaked at 877, so I sold a 850 call for $27 when the SP was $863. Technically still more than the 855 call I had on Friday, even accounting the $5 difference in strike. I lowered the strike because I want this to get called; I don't want to keep paying interest on the margin.
I may buy back and sell again, lower, if the SP does a dive in price sometime this week. We'll see how it goes.
I may buy back and sell again, lower, if the SP does a dive in price sometime this week. We'll see how it goes.
How have you been determining the CC strike price for the shares bought on margin? I am following a similar wheel strategy (sell put, buy shares on margin when put is assigned, sell CC until shares are sold to pay off margin). I have been using profits from put sales to buy shares and then set the CC strike at a high enough price so that I could buy 10 additional shares when the CC was assigned.
LN1_Casey
Draco dormiens nunquam titillandus
I’ve been determining it very, carry simply: is it more than what I bought the shares for? If so, GTG. if necessary I add the cumulative premiums, but thus far have not needed to as I’ve been selling at a profit. Well, haven’t tallied my interest yet as it’s a bit difficult to process, still.
I buy shares as available with the funds gained.
Thanks for the response. It seems that you are trying to sell the shares sold as soon as possible to pay off the margin. That is my plan too if the SP goes down after I sell my first CC. Thankfully, that hasn't happened to me yet.
Curious as to what you all think... are we heading for another week of Friday $850? This morning with the BTC excitement I thought maybe not, but as the day progressed it looked more and more like the same old same old.
I'm positioned well if we stay in the range. It's hard because I feel like I should DO SOMETHING but unless there's a big move one way or the other, best for me is likely to just do nothing for a few more days.
I'm positioned well if we stay in the range. It's hard because I feel like I should DO SOMETHING but unless there's a big move one way or the other, best for me is likely to just do nothing for a few more days.
I keep two classes of shares:
Perm positions I want to keep "forever" and do not sell calls against ever. The reason I don't do it is because one of these weeks, I'm going to get caught and lose everything. The losses can be severe and there's going to be trauma of buying back in higher than what I lost the shares for.
Trading positions, I play the wheel with. It makes sense to have short calls on them -always-. There's some finish to optimize entry/exists but you want to be "winning" on those when TSLA isn't doing well for that day or day(s).
Short Calls though are always above max pain and short puts are below max pain.
Doing nothing doesn't give theta so always be in the game.
Doing nothing doesn't give theta so always be in the game.
I’m sorry if I wasn’t clear; it’s not that I don’t have sold options open, it’s that if the price stays in the zone and I do nothing, they’ll be profitable, and it’s hard to see what adjustment I could make to be more profitable without increasing risk a bunch. I had thought this morning I’d have to buy a call back if the price shot up permanently on account of the BTC thing or whatever... but then gravity pulled back toward $850.
This is the characteristic that I most like about selling options as my primary strategy. Namely - the activity that I should most engage in, especially when I'm unsure, is the same activity I engage in for buy and hold on a company - do nothing, and let some more time go by.
One benefit is that I can use this dynamic to reduce my daily activity, time, and energy devoted to keeping track of things, and is an important reason why I've moved to 2 week options from 1 week.
A present example for me - I rolled into Feb 19 puts and calls mid/late last week. I realized over the weekend that it just doesn't matter what happened today - I wasn't going to make any adjustments to those 2 week options. Probably the soonest that anything will matter is Wed of this week, and if I don't follow very closely for a whole week, then that'll work well also.
(not advice of course - just what has been working well for me)
Once you made some profit you can roll your strikes up and down to something that will give you more juice for your theta.
I had 820 puts i rolled up to 840. Maybe I will pay for that decision but it seemed correct move at the time.
Runarbt
Active Member
I did something similar, had 3/5 $760 naked puts which I rolled to $820. Remains to see how smart this was.
(I went from 14x $760 to 9x $820 - pocketed an extra $7k, and decreased margin used by 10%)
Do you keep options or sets of options open in parallel so that you typically have puts and/or calls expiring each week? For example, in addition to the 2 week options you have expiring on Feb. 19th, did you open options 2 weeks ago that expire on Feb. 12th?
Edited for clarity (I think)
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Good question / clarification. I could have the 2 sets of options with alternating expiration weeks, so I end up with something expiring every week. This will be even easier to implement with 2 or more accounts (1 account has options expiring Feb 19, a different account has options expiring Feb 12, and each rolls on the 2 week expirys).
However I'm sticking with only an every other week expiration. In the present example, all of my puts and calls are expiring on Feb 19. As those puts and calls reach the point where I am rolling them out, I will be rolling out to March 5th and skipping over Feb 26. I'm pretty sure I can get more reliable and steady results with setting things up so I have options expiring every week, but sticking to every other week seems to be doing a better job of reducing my effort level.
Finding that balance between effort and results has been an ongoing process for me for months
LN1_Casey
Draco dormiens nunquam titillandus
Covered this call for $14, so netting about $12 if you add the loss from before. Still pretty good.
I think I'm going to wait to see if there is a last hour rally before selling another call, or perhaps Wednesday. I still plan on getting rid of these shares this week, as long as they're still a reasonable cost on Friday (and as Max Pain is 850 again, likely).
OI for next week @ $850 is pretty high. I would imagine this hangs around there through then at least if no news makes it take off.
Pretty reasonable C $28 and P $33 right now....
**Edit - not advise.....
Pretty reasonable C $28 and P $33 right now....
**Edit - not advise.....
LN1_Casey
Draco dormiens nunquam titillandus
I know.
It's so tempting. But I want to get rid of this margin interest this week....
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