Wiki Selling TSLA Options - Be the House

[KTC Lurker]

This is really a good thread to learn option trading. Want to share some trades I made today.

First trade is I sold 100 contracts for May 7 '21 $620 Put at $23.8.
Second trade is I sold 30 contract for Jan21 '22 $500 Put at $63.6.

Wish me luck! Thanks!

Do you actually hold 13,000 shares as insurance on this bet? Out of curiosity, what is your maintenance margin as a % of your portfolio value? I'm still learning where my broker (IBKR) draws the line on this leverage and haven't sold more puts than I have in share volume to stay in a comfort zone.

 

[Mokuzai]

Do you actually hold 13,000 shares as insurance on this bet? Out of curiosity, what is your maintenance margin as a % of your portfolio value? I'm still learning where my broker (IBKR) draws the line on this leverage and haven't sold more puts than I have in share volume to stay in a comfort zone.

These are sold puts, so to be covered OP would need $6,200,000 for the first trade and $1,500,000 for the second trade for a total of $7.7MM in cash to cover those puts. Or enough margin maintenance to be uncovered/naked.

 

[Stretch2727]

This is really a good thread to learn option trading. Want to share some trades I made today.

First trade is I sold 100 contracts for May 7 '21 $620 Put at $23.8.
Second trade is I sold 30 contract for Jan21 '22 $500 Put at $63.6.

Wish me luck! Thanks!

These are sold puts, so to be covered OP would need $6,200,000 for the first trade and $1,500,000 for the second trade for a total of $7.7MM in cash to cover those puts. Or enough margin maintenance to be uncovered/naked.

Too much exposure for someone learning options. I am hoping somehow he typo'ed the amount of contracts.

 

[Criscmt]

This is really a good thread to learn option trading. Want to share some trades I made today.

First trade is I sold 100 contracts for May 7 '21 $620 Put at $23.8.
Second trade is I sold 30 contract for Jan21 '22 $500 Put at $63.6.

Wish me luck! Thanks!

IF you are relying on margin for these, I am hoping you calculated the margin needs at various prices downward the share price can go before those expiry dates.

 

[Jak101]

Hi. For those of you selling puts, how do you pick a strike price to avoid getting assigned ? I have tried a rough formula of picking a strike that is 15 to 20 PCT below current stock price, even then I got assigned once or twice . But at least the stock price bounced back in those cases so the trade ended up being more profitable, once I sold the assigned stocks.

 

[Mokuzai]

Hi. For those of you selling puts, how do you pick a strike price to avoid getting assigned ? I have tried a rough formula of picking a strike that is 15 to 20 PCT below current stock price, even then I got assigned once or twice . But at least the stock price bounced back in those cases so the trade ended up being more profitable, once I sold the assigned stocks.

Were you getting early assigned? I've been deep ITM on the put side of my strategy for a while now. They're currently sitting at $850 strike but am still able to roll them every week for $1-$4 per contract. Not much but keeps them in play and not assigned while I wait for the underlying stock price to recover. I'm usually rolling the Monday or Tuesday of the expiry week to lessen the possibility of early assignment. This is taking an outsized chunk of my margin maintenance and I've had to watch that closely but so far been in the clear.

 

[adiggs]

Were you getting early assigned? I've been deep ITM on the put side of my strategy for a while now. They're currently sitting at $850 strike but am still able to roll them every week for $1-$4 per contract. Not much but keeps them in play and not assigned while I wait for the underlying stock price to recover. I'm usually rolling the Monday or Tuesday of the expiry week to lessen the possibility of early assignment. This is taking an outsized chunk of my margin maintenance and I've had to watch that closely but so far been in the clear.

I'm in the same boat though my put strike is more friendly. As with @Mokuzai I've been rolling for about 2 months and figure I can keep rolling as long as I want. My strikes are in the 760 to 775 range for the deep ITM puts. They're not nearly as deep ITM as they've been (over $150).

For @Jak101 's question - I haven't experienced an early assignment, and figure that the likelihood I will is extremely low. A couple of things that I do - keep an eye on the extrinsic / time value remaining. I tend to roll once that goes below $1. If I get to day before expiration (Roll Thursday) then I roll regardless.

The idea here is that the put owners - exercising their option early has the effect of giving the put seller whatever time value remains. In a world where there are traders hunting for pennies, giving away dollars doesn't make sense. @bxr140 has mentioned elsewhere a scenario where early exercise makes a lot of sense to me. Rolling the day before expiration or when extrinsic value gets too low both avoid that scenario.


From my own investment hypothesis I am completely comfortable being $150 ITM on the put side (I've been there before, and am slowly working the strike closer to the share price). That the shares will return to $800 is inevitable. Really - the only 'risk' I see in the position is that the shares drop a lot (to say $400) and I lose out on an opportunity to acquire shares at a steep discount (due to cash backing the sold puts being tied up backing ~$800ish puts instead of ~$400ish puts. I can live with that opportunity cost / risk.


I will say that I think my approach to handling these deep ITM puts is slightly different from @Mokuzai . I've been using 2 and 4 week rolls specifically to improve the strike price while also picking up small net credits. My intent / rationale is that I want the puts closer to the share price, so that if the share price decides to rocket upwards, then the put leg of my semi-perma strangle will start generating significant cash flow sooner; primarily so that if the share price is moving fast enough, then I'll have that cash flow to help keep the call leg strike in range of the share price. In effect - being $150 ITM on the put side is a no-op to me. Being $150 ITM on the call side is something I have a strong aversion to

 

[adiggs]

Hi. For those of you selling puts, how do you pick a strike price to avoid getting assigned ? I have tried a rough formula of picking a strike that is 15 to 20 PCT below current stock price, even then I got assigned once or twice . But at least the stock price bounced back in those cases so the trade ended up being more profitable, once I sold the assigned stocks.

An interesting experiment for you to run - if you have any deep ITM puts right now, go fire up your trading ticket and look at the option strikes you can roll to for a net credit that is 1 to 4 weeks further out than your current expiration. If you're more than 1 week to expiration then the roll options won't be as good.

I think you'll be surprised at just how big of a range / deep ITM you can be and still roll to for a net credit, possibly also with a strike price improvement.

 

[Tempus]

Just as a minor FYI. I had 2 of my ITM puts exercised early on tuesday during the short easter week. They were in the 820 range. I had cash+margin to cover so not a big deal but I was a bit surprised by the early exercise. It’s also letting me play the other side of the actual wheel instead of just rolling, so that is interesting to me as well.

 

[Tslynk67]

This is really a good thread to learn option trading. Want to share some trades I made today.

First trade is I sold 100 contracts for May 7 '21 $620 Put at $23.8.
Second trade is I sold 30 contract for Jan21 '22 $500 Put at $63.6.

Wish me luck! Thanks!

Netting ~$428k, that's quite a bet for someone "learning" As others have said, you doing that on margin, cash or somehow naked?

 

[Tslynk67]

Just as a minor FYI. I had 2 of my ITM puts exercised early on tuesday during the short easter week. They were in the 820 range. I had cash+margin to cover so not a big deal but I was a bit surprised by the early exercise. It’s also letting me play the other side of the actual wheel instead of just rolling, so that is interesting to me as well.

Yeah, always a risk when you're calls are d/DITM - what was the expiry date?

 

[Tempus]

Yeah, always a risk when you're calls are d/DITM - what was the expiry date?

They were april 1, called away that tuesday, the 30th. I only really bring it up because of the posts just upthread where people were comfortable with DITM puts not being called away. For the newer folks, yes, it can happen, and you better be prepared for it

 

[ReddyLeaf]

Just sold a 4/9 660p for $6, just on a dare to the MMs. Go ahead, make my day and assign me those shares. Edit: Also decided to buy back the 4/9 750c in various accounts, for about 70% profit. Just couldn’t resist this dip. Plus it gave me a chance to pick up a few more shares (8 so far) since all the CCs are now closed and it fees up that emergency cash.

 

[adiggs]

Just as a minor FYI. I had 2 of my ITM puts exercised early on tuesday during the short easter week. They were in the 820 range. I had cash+margin to cover so not a big deal but I was a bit surprised by the early exercise. It’s also letting me play the other side of the actual wheel instead of just rolling, so that is interesting to me as well.

Do you remember how much time / extrinsic value you had at the time of assignment? This is a good reminder that just because it is rare doesn't mean that it doesn't happen.

One way I manage this is even though I have margin available my theoretical margin usage should I be fully assigned is <1 contract (I am, in effect, cash secured on my puts). My concern and rationale for being so conservative is that if the shares drop a lot and I get assigned I don't want to ALSO pick up a margin call at the same time. I'm living off the portfolio now and a particularly bad move while I'm using a large amount of margin might put me back into the workforce. Only 2 months and I think I'm ~useless in the workforce

 

[Yoona]

Just sold a 4/9 660p for $6, just on a dare to the MMs. Go ahead, make my day and assign me those shares.

I moved all my 800 CC to 700.
Tempted to open 30 IC 595/600/720/725 for 'easy' $3k.

 

[bxr140]

Hi. For those of you selling puts, how do you pick a strike price to avoid getting assigned ?

First, statistically, you will get assigned, or at least go ITM. Can't get around that, so don't try. That's the agreement you make with yourself when you sell options.

Obviously, the farther OTM your strike, generally the less likely you are to go ITM, but if you try to apply some static approach (like always selling at % of underlying) you're playing the losing side of casino odds. You should be using your preferred mix of the litany of market/fundamental/technical analyses methods to determine where there might be a price/zone of significance, in the timeframe you're contemplating for your option, then choose a strike at or just below/above that price of significance depending on how agressive you want to be.

You should also understand volatility and where its trending; selling options is really only the ideal strategy in higher volatility environments, because volatility has such a HUGE impact on the value of a contract. We've talked about this upthread, but most people here are actually making money off their sold options from underlying movement, and much of the time in rising volatility environments. In pretty much all cases those people could make more money with less risk buying options rather than selling them.

I have tried a rough formula of picking a strike that is 15 to 20 PCT below current stock price, even then I got assigned once or twice . But at least the stock price bounced back in those cases so the trade ended up being more profitable, once I sold the assigned stocks.

So just to be clear, that's the bottom side of the wheel, which at one point was the intent of this thread. The idea is that you sell a put, get assigned shares--hopefully not at a net loss--and then hopefully the share price goes back up.

 

[adiggs]

This is really a good thread to learn option trading. Want to share some trades I made today.

First trade is I sold 100 contracts for May 7 '21 $620 Put at $23.8.
Second trade is I sold 30 contract for Jan21 '22 $500 Put at $63.6.

Wish me luck! Thanks!

Too much exposure for someone learning options. I am hoping somehow he typo'ed the amount of contracts.

As an 8 year Tesla owner, one thing that I've learned is that wherever we're at in life (financially), there are those that are better off and those that are worse off. I've also learned that we each have a threshold below which the money is noise / educational but not meaningful. An easy illustration that I expect applies to all of us - if we're checking out at the grocery store and see a pack of gum that we want, our purchase sequence is See : Want : Get. Whether it's $1 or $3 it is noise. See / Want / Get. We don't pull up Amazon on our smartphone to evaluation competitive options and prices, go to other stores to evaluate the price on that gum there and see if we can get a better deal. It is noise.

That threshold is different for each of us.

What drove this home for me was awhile back when the Ludicrous Model S came out, there were Tesla owners that had bought their Model S a month or less earlier that were immediately selling the old and buying the new. Some of them wouldn't even had done it in that order - buy the new and sell the old (or trade it in just to keep things easy) with no more thought than we'd put into buying a pack of gum. See : Want : Get. Actually I think I got my Roadster from somebody like this - somebody traded in a 1 year old Roadster to a Lexus dealership in New Jersey with 12k miles. The dealership had it price at what I know was a "move it now" price (I'd been looking for awhile), so I got a 1/2 price Roadster with 12k miles, with the other 1/2 paid for by somebody that had a year with it and wanted something new. For them - See : Want : Get (and I was the beneficiary ).


It may be that for @Davidzhao365 this level of commitment is down in the noise level. This is the volume that he needs in an experimental position for the learning to be meaningful. Clearly for most or all of us this level of activity is .. freaky .. and sounds hugely risky

This is an illustration of why I don't (or at least rarely) talk about position sizes. As educational information it doesn't make me smarter (or create an opportunity to be smarter). The expiration and strike information, the context, and what they are trying to accomplish - that might expose me to new ideas that will influence how I think about my own trades. I've had any number of these experiences over the last year since I started this thread, and they have come from many different people.

It MIGHT be that a new thread that does focus on very large position sizes, and how to get in and out of the market with a minimum wake for these size positions is in order and will draw some interest. How much of an impact did those 100 contracts have on the price of that option? Did it fill in a single block or was it a series of fills over a day or more? Is that $23.80 per contract a weighted average over all of the contracts? Was that a market order or a limit order, and how was the limit chosen? If I were working at that volume then this sort of information would be valuable to me. I won't be starting that thread though - I don't have any meaningful experience or education to contribute, though I would probably read it with interest (I'd sure like to be working at this level at some point in the future).

 

[Tempus]

Do you remember how much time / extrinsic value you had at the time of assignment? This is a good reminder that just because it is rare doesn't mean that it doesn't happen.

One way I manage this is even though I have margin available my theoretical margin usage should I be fully assigned is <1 contract (I am, in effect, cash secured on my puts). My concern and rationale for being so conservative is that if the shares drop a lot and I get assigned I don't want to ALSO pick up a margin call at the same time. I'm living off the portfolio now and a particularly bad move while I'm using a large amount of margin might put me back into the workforce. Only 2 months and I think I'm ~useless in the workforce

I don't unfortunately. I was out of pocket all day tuesday so didn't spend any time looking at the console, and they were called away overnight. Woke up to that msg from TDA.

I was also keeping a good amount of cash in the account for this eventuality (and for the occasional call buy when the price is stupid low as it was recently). So i didn't have enough cash to cover both puts, but about 1 1/2 at those prices. I am also a bit less conservative than you are - as i'm still actively in the workforce, and have income to cover day to day needs.

 

[UltradoomY]

First, statistically, you will get assigned, or at least go ITM. Can't get around that, so don't try. That's the agreement you make with yourself when you sell options.

Obviously, the farther OTM your strike, generally the less likely you are to go ITM, but if you try to apply some static approach (like always selling at % of underlying) you're playing the losing side of casino odds. You should be using your preferred mix of the litany of market/fundamental/technical analyses methods to determine where there might be a price/zone of significance, in the timeframe you're contemplating for your option, then choose a strike at or just below/above that price of significance depending on how agressive you want to be.

You should also understand volatility and where its trending; selling options is really only the ideal strategy in higher volatility environments, because volatility has such a HUGE impact on the value of a contract. We've talked about this upthread, but most people here are actually making money off their sold options from underlying movement, and much of the time in rising volatility environments. In pretty much all cases those people could make more money with less risk buying options rather than selling them.



So just to be clear, that's the bottom side of the wheel, which at one point was the intent of this thread. The idea is that you sell a put, get assigned shares--hopefully not at a net loss--and then hopefully the share price goes back up.

I really enjoy your contributions bxr140 and appreciate returning to the underlying Most important part of this side of equities - that is IV.
Selling volatility would be a better term in my opinion than "selling options" (or buying)
Right now for example 5/14 $700 strike C option has an IV of 62 which is high but not scary high - so that means it is pricey but not obscene - however when compared to the Delta of .47 it looks like a tough sell of a call and a better buy being at the IV high / medium limit.
I am looking at buying these calls if I can get a good price today to have a play on FOMO on the run up to earnings.

disclosure - for me, I rate an IV over 60 to be high and over 80 to be very high.

Will post what I end up with if I get some fills today.
Cheers

 

[Oil4AsphaultOnly]

I feel a bit the traitor this morning

A recent pattern I've noticed from my own trading is that I get too aggressive with my strikes, following the shares down with covered calls or following the shares up with short puts.

SO I decided to try something out today. With the shares up quite a bit recently plus my view that the general investor community (no doubt helped by some FUDsters) will react badly to P/D, I decided to buy 1 625 Put for 4/16 expiration to get a bit of experience with this. Recent experience suggests to me that its time for the share price to reverse - this will get me some minor exposure to that reversal should it happen, as well as starting to gain some experience with this.

Next time I find myself wanting to roll highly profitable calls towards the share price I'm likely to buy a call instead. If nothing else this will help me not follow the shares up or down chasing premiums

And hey! I managed to roll calls today pretty much at the peak (par) but I also bought that 1 put pretty much at the peak as well. So my TSLA short is off to a great start.

So how did this go? Last Thursday, I wished you luck on this trade. If you don't mind sharing, I'm curious as to what became of it?