Was specifically talking selling puts and rolling puts.
This link is pretty comprehensive here.
Tax Treatment for Call & Put Options
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Was specifically talking selling puts and rolling puts.
This link is pretty comprehensive here.
Tax Treatment for Call & Put Options
Was specifically talking selling puts and rolling puts.
This link is pretty comprehensive here.
Tax Treatment for Call & Put Options
I already read that link, it doesn't cover the tax treatment for shorting puts. "Protective puts" are being long the option, which is the opposite trade.
@Oil4AsphaultOnly
Alright, I dug into the IRS Publication and researched the relevant topics:
Publication 550 (2019), Investment Income and Expenses | Internal Revenue Service
I was wrong on if puts sold are > 1 year they can become long-term gains. They are short term gains regardless. The only benefit of selling a 2022 option (call or put) is you can choose the year you want the closing transaction to occur.
Alright, I dug into the IRS Publication and researched the relevant topics:
Publication 550 (2019), Investment Income and Expenses | Internal Revenue Service
I was wrong on if puts sold are > 1 year they can become long-term gains. They are short term gains regardless. The only benefit of selling a 2022 option (call or put) is you can choose the year you want the closing transaction to occur.
ok, time to fess up. Yesterday, I sold 12Mar 800c for $5.00 on ALL of my TSLA shares.
Delta was around 0.10 at the time, so not a high risk play, but still nerve racking for this newbie. I didn’t time the Monday peak perfectly, but apparently good enough based on today’s nearly $40 drop, since the options are down 55%. As part of my continued learning, I finally realized that using the premium to buy additional shares of TSLA, especially if I could buy at a lower SP, would act as an additional hedge against a rising SP. Before the trade, I had enough free cash in the accounts to cover rebuying the calls back up to $850 SP, which seemed relatively safe for 3/12 exp. Then, I realized that in an emergency, I could sell those odd lot shares (06, 16, 30 in each account) if the SP rose above $850, thereby raising additional cash to buyback the ITM options. Again, my goal is to generate some cash by selling covered calls, but definitely NOT lose my shares.
Hmmmm, so better yet, why leave the emergency cash static, if my biggest concern is losing shares on a 800c that goes DITM against me? It would be better to have the “emergency cash” rising in value along with the SP. This is probably eminently obvious to all you experts, but not to this newbie.
So, knowing that the SP goes up and down, this morning I put in 5shr buys at $5-$10 increments all the way down to $620. I managed to snag 25 shares down to $690 without even worrying about whether I would catch the best price drop. If the price stays below $800, which seems highly likely, the calls expire worthless and all of those premiums go into TSLA at a lower cost basis than the strike. A big win for my trading experience and a relief to not risk losing my shares.
If the SP somehow manages a massive rally and goes over $800 (say $900), I have 900x25=$22,500 additional available to buyback the DITM options. This combined with the $25,000 actual cash in the accounts, means that I could buyback nearly five contracts, even in the “worst” case $900 SP scenario. In reality, I would certainly be able to roll four contracts at a time up & out another two weeks and collect some additional premium, following @adiggs methods.
So, even being constrained in an IRA without margin, I’m able to sell low risk (0.10 delta) covered calls and slowly increase the number of shares purchased. At this time I’m not comfortable going above 0.15 delta to access those higher premiums, just too risky from a long term perspective. If I can continue this method the rest of this month, I should have built up another 100 shares before the next earnings announcement.
From the tracking section of a previous post of mine - I did some research and tried to figure out a way to get this cash flow tracking implemented in Excel. I couldn't figure it out on my own and went to my font of all knowledge - DuckDuckGo.
Where I discovered that yes, I can do something like this. But my data is formatted wrong. The data needs to be in a 1 row per transaction (so 1 row for the open, and a different row for the close, along with a flag indicating whether the $ are coming in or going out). My data is 1 row per trade with open and close dates, open and close $s. I found this by looking for implementing a business cash flow statement and other financial reports. Because that's what is being tracked - the equivalent of a business reporting both an income statement and a cash flow statement (there is also a balance sheet in business reporting - I've got a different method I use for tracking my balance sheet changes over time -- I record the cash and shares in each account, each month).
Implementing the cash flow statement being a big enough pain in the rear I've decided to stick with my income statement / trade profit-loss that I have implemented right now. I know that the cash flow will be different from profits and that if I stick to net credits then the cash flow will at least be positive, even if it'll be a pain to know what it is exactly.
Interesting side effect of the pivot table I use to summarize all of my trades - I position them in time via the close date. Because the open positions don't have a trade date, the pivot table puts these into a "<March 25, 2020" bucket (any guess when I started this?
).That bucket represents the currently open and unrealized / paper gains, along with the cash in that account that I have received but haven't yet earned. So I can watch that number going up and down to do my own approximation of what the future realized results will be anytime I want. A roll for a deep ITM option will show up in my summary pivot table as a loss in the realized results for the time period and a larger increase in the bucket of stuff that doesn't have a close date.
So I think I've got enough info to handle the cash flow even if I don't have a monthly or quarterly cash flow statement like I really want. The net income / realized results are easy to track and report on - I've already got that.
sub
Active Member
ok, time to fess up. Yesterday, I sold 12Mar 800c for $5.00 on ALL of my TSLA shares.
As part of my continued learning, I finally realized that using the premium to buy additional shares of TSLA, especially if I could buy at a lower SP, would act as an additional hedge against a rising SP. Before the trade, I had enough free cash in the accounts to cover rebuying the calls back up to $850 SP, which seemed relatively safe for 3/12 exp. Then, I realized that in an emergency, I could sell those odd lot shares (06, 16, 30 in each account) if the SP rose above $850, thereby raising additional cash to buyback the ITM options. Again, my goal is to generate some cash by selling covered calls, but definitely NOT lose my shares.
Hmmmm, so better yet, why leave the emergency cash static, if my biggest concern is losing shares on a 800c that goes DITM against me? It would be better to have the “emergency cash” rising in value along with the SP. This is probably eminently obvious to all you experts, but not to this newbie.
So, knowing that the SP goes up and down, this morning I put in 5shr buys at $5-$10 increments all the way down to $620. I managed to snag 25 shares down to $690 without even worrying about whether I would catch the best price drop. If the price stays below $800, which seems highly likely, the calls expire worthless and all of those premiums go into TSLA at a lower cost basis than the strike. A big win for my trading experience and a relief to not risk losing my shares.
If the SP somehow manages a massive rally and goes over $800 (say $900), I have 900x25=$22,500 additional available to buyback the DITM options. This combined with the $25,000 actual cash in the accounts, means that I could buyback nearly five contracts, even in the “worst” case $900 SP scenario. In reality, I would certainly be able to roll four contracts at a time up & out another two weeks and collect some additional premium, following @adiggs methods.
So, even being constrained in an IRA without margin, I’m able to sell low risk (0.10 delta) covered calls and slowly increase the number of shares purchased. At this time I’m not comfortable going above 0.15 delta to access those higher premiums, just too risky from a long term perspective. If I can continue this method the rest of this month, I should have built up another 100 shares before the next earnings announcement.
why worry about buying the calls back? Just roll them out and up. If you roll early enough, you can get $30-$50 farther OTM strike with a one week adjustment for break even or if you want a slight credit. I do the same thing, I buy shares with the premium immediately, I don't worry about the SP.
ok, time to fess up. Yesterday, I sold 12Mar 800c for $5.00 on ALL of my TSLA shares.
As part of my continued learning, I finally realized that using the premium to buy additional shares of TSLA, especially if I could buy at a lower SP, would act as an additional hedge against a rising SP. Before the trade, I had enough free cash in the accounts to cover rebuying the calls back up to $850 SP, which seemed relatively safe for 3/12 exp. Then, I realized that in an emergency, I could sell those odd lot shares (06, 16, 30 in each account) if the SP rose above $850, thereby raising additional cash to buyback the ITM options. Again, my goal is to generate some cash by selling covered calls, but definitely NOT lose my shares.
Hmmmm, so better yet, why leave the emergency cash static, if my biggest concern is losing shares on a 800c that goes DITM against me? It would be better to have the “emergency cash” rising in value along with the SP. This is probably eminently obvious to all you experts, but not to this newbie.
So, knowing that the SP goes up and down, this morning I put in 5shr buys at $5-$10 increments all the way down to $620. I managed to snag 25 shares down to $690 without even worrying about whether I would catch the best price drop. If the price stays below $800, which seems highly likely, the calls expire worthless and all of those premiums go into TSLA at a lower cost basis than the strike. A big win for my trading experience and a relief to not risk losing my shares.
If the SP somehow manages a massive rally and goes over $800 (say $900), I have 900x25=$22,500 additional available to buyback the DITM options. This combined with the $25,000 actual cash in the accounts, means that I could buyback nearly five contracts, even in the “worst” case $900 SP scenario. In reality, I would certainly be able to roll four contracts at a time up & out another two weeks and collect some additional premium, following @adiggs methods.
So, even being constrained in an IRA without margin, I’m able to sell low risk (0.10 delta) covered calls and slowly increase the number of shares purchased. At this time I’m not comfortable going above 0.15 delta to access those higher premiums, just too risky from a long term perspective. If I can continue this method the rest of this month, I should have built up another 100 shares before the next earnings announcement.
This gave and @adiggs gave me the courage to finally pull the trigger and start selling covered calls, so thanks. I am just playing around now, but I just sold a single12MAR 800 for $2.30 to get a feel for how this works. I likely will sell again this month, but not over earnings calls / other large predictable events. Ultimately, I would like to leverage all of my shares...but that will take some time.
Thanks for all the insight provided in this thread.
corduroy
Active Member
I sold some calls and a put today (short strangle) with March 12 expirations. I don't have enough confidence in these conditions to go out any farther. The calls are doing great but of course the put is underwater.
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I been selling puts today for Friday $610 strike and under. I haven't sold any calls the premiums seem so low that is not even worth it to me. I usually try to collect at least $2 for 25% OTM CCs.
Congratulations. Take things slow and one day at a time. I started with just a single CC as well. TSLA can move against you quickly and vigorously, so spend a few months reading this thread, as well as some of the other options and trading threads. Trade cautiously for a few months and you will be comfortable before you know it. I’ve made some impulsive options buys that went completely bust, as well as stock buys that were clearly at too high an entry price. Nowadays, I just wait for the SP to come to me and I pick up 5-10 shares at a local minimum. There’s no hurry.
I’ve mentioned this before, but probably on the other trading thread: My trades are all in IRAs and my trading platform will not allow multiple-leg trade “rolls.” I must first buy back (with cash, not margin) to close a CC or CSP, and then sell the next option. It’s clunky and slow, but it eventually works as long as I keep enough free cash available in each account. The platform is definitely not built for trading, especially options, but I’m not really interested in moving to another brokerage, so kinda stuck.
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I’ve mentioned this before, but probably on the other trading thread: My trades are all in IRAs and my trading platform will not allow multiple-leg trade “rolls.” I must first buy back (with cash, not margin) to close a CC or CSP, and then sell the next option. It’s clunky and slow, but it eventually works as long as I keep enough free cash available in each account. The platform is definitely not built for trading, especially options, but I’m not really interested in moving to another brokerage, so kinda stuck.
Who's your broker? I have an IRA with Schwab, and at first I thought the UI didn't allow for complex option trades (unlike the TDameritrade UI), but it's just that they buried the "legacy options trading" tool link. So your broker might be like Schwab and they've simply buried the interface somewhere to make it harder for "novices" to accidentally get themselves in trouble.
Xepa777
Banned
Dumb 101 noob question: I sold a put last week but noticed that it didn't move my equity/margin ratio on Schwab (I'm at 89% right now). Does that mean by selling puts I'm not at risk of getting margin called? I'm just at risk of getting annihilated if I sell too many and buy too many shares at Tesla at a super high price. Right?
Getting into the wheel, cash in place.
Sold a please-assign-me p650 for 3/12 yesterday for 29.50 yesterday.
Sold a please-assign-me p650 for 3/12 yesterday for 29.50 yesterday.
Runarbt
Active Member
Selling naked puts at schwab do tie up some margin. They calculate this in a couple of different ways, one is:
- 20% underlying value - out of the money amount + premium
Today’s drop was too good to pass up so closed out most of these at $1.00, 80% profit. It feels good to be out of those options for a tidy profit (and able to sleep well through the weekend). One account only has $30 in free cash available in the settlement account, so will wait until expiration or $0.15, or worse case sell some odd lot TSLA to fund the buyback. I’m still looking at the forward rolling position, but probably 19/26 Mar 750c/800c, and will likely wait until Monday to sell.ok, time to fess up. Yesterday, I sold 12Mar 800c for $5.00 on ALL of my TSLA shares.
Whoever gave you that not advice is a moron.
Lol, no worries I don't mind not trying to be too greedy.
I'm at Fidelity and have access to the roll transaction in my IRA(s). @Lycanthrope has mentioned previously that he didn't have roll transactions available but he also lives in Europe. My opinion - I see that you're in the US - you must really love your broker for other reasons if you're still with them without this particular transaction ticket.
I closed out my remaining calls in the big position and established a new covered call position at $615 strike for Mar 19 delivery. That puts that account in a 795 / 615 inverted strangle. Much wider of a range than I would like to be in, but I also consider the near term bias to be downwards, thus the very aggressive call position. I also chose this aggressive position as I plan to take the very large premium ($40 or so) and use it on the next put roll (if necessary) to pay for a big improvement on the strike on its next roll. I also want more downside protection than a higher strike call would provide.
I've previously said I expect we'll hit 600 before we see 800; I'm starting to think 500 before 800.
I also consider low 400s to be on the table. My rationale is that was about where were at prior to the S&P announcement at which point the shares shot up from there. In effect I think of this as a retracement to fill in that big run up into the inclusion.
In the other position - my test position - I closed out the calls today when the shares were around $640. I then lost track of time while doing other stuff and didn't open the replacement position. I'll be looking at a less aggressive call when I open that tomorrow - probably something closer to 650 than the 615.
wow, today was brutal. And I agree with adiggs that there's probably more downside coming.
In light of that, what would you have done differently?
Here's what I've done so far:
TSLA @ ~790 on Feb 18, 2021.
- STO 740P 2/26 for $10.93
TSLA @ ~700 (and dropping) on Feb 25, 2021.
- BTC 740P 2/26 @ $40.35
- STO 725P 3/05 for $42.27 (net gain of $1.88)
TSLA @ ~670 on Mar 03, 2021.
- BTC 725P 3/05 @ $48.01
- STO 715P 3/12 for $49.05 (net gain of $1.04)
So far, my put options are ~$100/shr underwater (potentially being more underwater next week) and I've only made ~$1300 for 3 weeks of work. Could I have done anything differently (assuming that I stick with this rolling of options strategy)?
I feel like if I close my put position and immediately buy the shares, my "cost" per share would be the strike price of 715 ($100 to BTC the put and another $615 to buy the shares in the open market). Contrast this with 740 if I had done the same last week instead of rolling. Which would be even better than the $790 per share price if I had bought the shares on the previous week instead of selling puts. Is that the right way to look at the progression of these trades?
In light of that, what would you have done differently?
Here's what I've done so far:
TSLA @ ~790 on Feb 18, 2021.
- STO 740P 2/26 for $10.93
TSLA @ ~700 (and dropping) on Feb 25, 2021.
- BTC 740P 2/26 @ $40.35
- STO 725P 3/05 for $42.27 (net gain of $1.88)
TSLA @ ~670 on Mar 03, 2021.
- BTC 725P 3/05 @ $48.01
- STO 715P 3/12 for $49.05 (net gain of $1.04)
So far, my put options are ~$100/shr underwater (potentially being more underwater next week) and I've only made ~$1300 for 3 weeks of work. Could I have done anything differently (assuming that I stick with this rolling of options strategy)?
I feel like if I close my put position and immediately buy the shares, my "cost" per share would be the strike price of 715 ($100 to BTC the put and another $615 to buy the shares in the open market). Contrast this with 740 if I had done the same last week instead of rolling. Which would be even better than the $790 per share price if I had bought the shares on the previous week instead of selling puts. Is that the right way to look at the progression of these trades?
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