Wiki Selling TSLA Options - Be the House

[Chenkers]

Well almost. Trying to figure out how to make it applicable to my sons $6000 account.

I'm currently working with a couple of my sons building their accounts that are at a similar size. We're basically taking half of the excess liquidity available in their accounts and using that to determine how many IC they can sell in a given week. So for an account with a $6000 excess liquidity (assuming mostly cash) that would initially work out to around 1-2 contracts per week. Currently that would be returning $360-$900 per week depending on how conservative or aggressive the contracts are. So 6 to 15% return in the first week is not too bad. Compounding will also increase the number of contracts able to be sold per week over time. When I put all this into a spreadsheet and extend it out for a year, that $6,000 has the potential to turn into $750k+ (assuming perfect execution). We're only a few weeks in and expect a few stumbles along the way, but so far things are going according to plan.

 

[phantasms]

I'm currently working with a couple of my sons building their accounts that are at a similar size. We're basically taking half of the excess liquidity available in their accounts and using that to determine how many IC they can sell in a given week. So for an account with a $6000 excess liquidity (assuming mostly cash) that would initially work out to around 1-2 contracts per week. Currently that would be returning $360-$900 per week depending on how conservative or aggressive the contracts are. So 6 to 15% return in the first week is not too bad. Compounding will also increase the number of contracts able to be sold per week over time. When I put all this into a spreadsheet and extend it out for a year, that $6,000 has the potential to turn into $750k+ (assuming perfect execution). We're only a few weeks in and expect a few stumbles along the way, but so far things are going according to plan.

I'm sorry but can you explain this in more detail? IC?

I've been taking my weekly covered call earnings and slowly turning it into shares at the rate of about 3 per month. I write 5 contracts per week and aim to make about $1 per share. Maybe I'll get more aggressive and/or more skilled with time. I leave a little buffer of cash in case I need to BTC at a loss. I'm currently at 509 shares. As, at this rate, it'll be a little under 3 years until I'm at 600 and able to write another weekly contract. [ignoring future splits] I'd love to find a better use of my cash. Please give me more not advice about how $6,000 can return 6% - 15% per week. If I can run the cash up at a decent rate I can start selling a put much sooner than 3 years and, if it gets executed, wheel away.

Thank you!

 

[Chenkers]

I'm sorry but can you explain this in more detail? IC?

I've been taking my weekly covered call earnings and slowly turning it into shares at the rate of about 3 per month. I write 5 contracts per week and aim to make about $1 per share. Maybe I'll get more aggressive and/or more skilled with time. I leave a little buffer of cash in case I need to BTC at a loss. I'm currently at 509 shares. As, at this rate, it'll be a little under 3 years until I'm at 600 and able to write another weekly contract. [ignoring future splits] I'd love to find a better use of my cash. Please give me more not advice about how $6,000 can return 6% - 15% per week. If I can run the cash up at a decent rate I can start selling a put much sooner than 3 years and, if it gets executed, wheel away.

Thank you!

An IC is short for an Iron Condor, basically a complex option position. For example, one of my sons has an account with an excess liquidity of about $5k. The overall account value is a bit larger due to shares owned but this represents the excess margin value he has to trade against. If the account was all cash then the excess liquidity would equal the account value.

This week he sold a single IC that was made up of a 675P+ 700P- 750C- and 775C+. So the IC is basically a put and call spread sold together as one contract. You don't need to hold any shares to sell this, you just need to cover the maintenance margin requirement. This IC received a contract price of $4.35, so $435 less commissions and had a portfolio maintenance margin requirement of around $2,050. As long as the share price on Friday is between $700 and $750, he will get to keep the $435, a return of 8.7% on the capital used. Do this week after week adding the cash premiums back in and you will be able to sell more and more contracts per week, allowing the account value to grow exponentially over time.

 

[pz1975]

I'm currently working with a couple of my sons building their accounts that are at a similar size. We're basically taking half of the excess liquidity available in their accounts and using that to determine how many IC they can sell in a given week. So for an account with a $6000 excess liquidity (assuming mostly cash) that would initially work out to around 1-2 contracts per week. Currently that would be returning $360-$900 per week depending on how conservative or aggressive the contracts are. So 6 to 15% return in the first week is not too bad. Compounding will also increase the number of contracts able to be sold per week over time. When I put all this into a spreadsheet and extend it out for a year, that $6,000 has the potential to turn into $750k+ (assuming perfect execution). We're only a few weeks in and expect a few stumbles along the way, but so far things are going according to plan.

If you can turn $6K into $750K in a year, then you should quit whatever job you do and start a large hedge fund and make billions for us all! Maybe you will even surpass Spiegel someday.

 

[Yoona]

I'm sorry but can you explain this in more detail? IC?

I've been taking my weekly covered call earnings and slowly turning it into shares at the rate of about 3 per month. I write 5 contracts per week and aim to make about $1 per share. Maybe I'll get more aggressive and/or more skilled with time. I leave a little buffer of cash in case I need to BTC at a loss. I'm currently at 509 shares. As, at this rate, it'll be a little under 3 years until I'm at 600 and able to write another weekly contract. [ignoring future splits] I'd love to find a better use of my cash. Please give me more not advice about how $6,000 can return 6% - 15% per week. If I can run the cash up at a decent rate I can start selling a put much sooner than 3 years and, if it gets executed, wheel away.

Thank you!

9/3 IC x2 +p680/-p710/-c750/+c780 at tonight's chain will give 706 prem - 17 fee = 689 gain, margin 5294

689/5294=13.01%

 

[phantasms]

9/3 IC x2 +p680/-p710/-c750/+c780 at tonight's chain will give 706 prem - 17 fee = 689 gain, margin 5294

689/5294=13.01%

But seriously…I tremendously appreciate the time you put into that reply.

1. I’m not sure what an IC is. Iron condor?

2. Is one able to buy and sell a put and buy and sell a call like that with only $6k in cash? Is this a situation that needs margin and could blow my face off if the stock goes hard on either direction? I understand there’s no free money and I’m happy to risk the $6k but don’t want my account to suddenly be negative $43,689,533 one morning.

 

[juanmedina]

View attachment 703852

But seriously…I tremendously appreciate the time you put into that reply.

1. I’m not sure what an IC is. Iron condor?

2. Is one able to buy and sell a put and buy and sell a call like that with only $6k in cash? Is this a situation that needs margin and could blow my face off if the stock goes hard on either direction? I understand there’s no free money and I’m happy to risk the $6k but don’t want my account to suddenly be negative $43,689,533 one morning.

this video explains IC's well; it is a defined risk strategy:

 

[adiggs]

Since the “wheel” idea is really no longer part of this thread, I suggest a thread title change.

I would recommend “adiggs TSLA Options Strategy Thread”

While I appreciate the sentiment it's all of our thread! As others - I'm getting so much out of the discussion and ideas it's really hard to quantify. I guess one easy attempt - the brokerage account that was suggested we spend down to 0 here at the start of retirement (7ish years) so that the retirement accounts can take over once they're accessible without the penalty; that brokerage is instead growing while so far providing a larger income than back in my paycheck days.

Oh - and that's with the share price down from previous high. I don't particularly track or care about portfolio value - I track shares & cash (or now - I track delta on the long calls + cash) because the share price going up and down doesn't change the number of calls I can sell . The number of calls though is an income generating resource, and that's what I DO track.

When the price was at $738ish earlier I opened a bunch of call spreads -750/770 to see how that works.

If I were to do something like that, it'd draw the share price upwards like a magnet.

So clearly the thing for me to do is sell some more BPS! That'll protect my 740cc

 

[tradenewbie]

End of July it was the first time I decided not to roll and got exercised on 660 & 680 and thought I could easily buy it back the week after (Of course, next week SP jumped up to >700 without any return). With the help of SP finally dropped two week ago, I bought some back but it was a painful experience of a waiting game although I did sell aggressive put during this timeframe.

Long story short, I have been rolling a 680cc which will expire this Friday. What would be the best feasible way to save this 680cc? (With this DITM, it won't be able to generate much premium even rolling into next week with the same strike.)

 

[InTheShadows]

13.44% just from selling premium?

Yes. I did closed values/(total portfolio - closed values) to remove the increase from stock appreciation.

I did close out some OTM leaps that may have increased the % by 1 or 2. However the share price difference from beginning of month to now negates that.

 

[Yoona]

End of July it was the first time I decided not to roll and got exercised on 660 & 680 and thought I could easily buy it back the week after (Of course, next week SP jumped up to >700 without any return). With the help of SP finally dropped two week ago, I bought some back but it was a painful experience of a waiting game although I did sell aggressive put during this timeframe.

Long story short, I have been rolling a 680cc which will expire this Friday. What would be the best feasible way to save this 680cc? (With this DITM, it won't be able to generate much premium even rolling into next week with the same strike.)

I had the same prob a few months ago when a -c645 got quickly buried DITM.

I was testing the Wheel with 100 garbage shares at cost basis 645. At first, I was ok with the CC getting assigned since I already got my credits on 2-3 previous rolls. But i changed my mind and decided to keep the shares instead. The 'best' solution at that time was to roll it to 18Mar2022 -c830 with credit.

Bad news - no more CC income on that test until next yr.

Good news - the CC doesn't use up margin anyway, so it's no harm, no foul. If can't roll next yr, it will still have a 185x100=18,500 gain due to the strike improvement.

 

[rikkert]

Good news - the CC doesn't use up margin anyway, so it's no harm, no foul. If can't roll next yr, it will still have a 185x100=18,500 gain due to the strike improvement.

Could you elaborate on that last line please?
As I understand, 830-645=185 but what do you mean by "strike improvement"?

 

[rikkert]

Right, I understand now, assuming your shares will be called away, it will be for a higher price (830 as opposed to 645) and you don't lose on premiums.
(sorry for the additional post, it seems I am not allowed to edit)

 

[ammulder]

Well, you all talking about these spreads and iron condors finally got me off my butt and I upgraded from level 2 to level 4 options trading with E*Trade. That’s what I had to do to get Portfolio Margin, without which a put spread took the same cash/margin as the full sold put.

Now if ”they” will deliver a down day so I can take this for a spin, that would be lovely.

Just one is good, though.

 

[UltradoomY]

End of July it was the first time I decided not to roll and got exercised on 660 & 680 and thought I could easily buy it back the week after (Of course, next week SP jumped up to >700 without any return). With the help of SP finally dropped two week ago, I bought some back but it was a painful experience of a waiting game although I did sell aggressive put during this timeframe.

Long story short, I have been rolling a 680cc which will expire this Friday. What would be the best feasible way to save this 680cc? (With this DITM, it won't be able to generate much premium even rolling into next week with the same strike.)

Lot's of options but they all carry more risk.....
Option 1 -
You could split the CC from one to 2 contracts and roll out -
Because (as of premarket this minute) the share price is $735 - you are $55 ITM
You could Roll/split your current CC into 2 $705's for next week for a small credit
This does provide time, and credit and additional roll options from there to the triple witching on 09/17, however it doubles your risk if the stock takes off.

Option 2 -
Flip the CC from a covered call to a put
This would be a $55 ITM put such as a $790 put for next week.
This gives a credit and time again if you think the shares are going up.

Option 3 - Flip / Split the contract into multiple puts - 2 $765 put contracts for time and a credit again if you think it's going up.

Option 4 - Take the "L" close it out and pay the man, live to fight another day.

There are obviously more strategies than this, these are just examples and of course "not advice" but with anything, you have options on your options if you want.
Cheers.

 

[AquaY]

Well, you all talking about these spreads and iron condors finally got me off my butt and I upgraded from level 2 to level 4 options trading with E*Trade. That’s what I had to do to get Portfolio Margin, without which a put spread took the same cash/margin as the full sold put.

Now if ”they” will deliver a down day so I can take this for a spin, that would be lovely.

Just one is good, though.

I think level 3 at Etrade is sufficient for that. Level 4 adds the ability to write naked calls.

 

[Chenkers]

Long story short, I have been rolling a 680cc which will expire this Friday. What would be the best feasible way to save this 680cc? (With this DITM, it won't be able to generate much premium even rolling into next week with the same strike.)

Some not advice that I find can be helpful is to look at the CC simply in monetary terms. At yesterdays close a 680CC had an ask of $58.10, so you could BTC for around $5,800 but that would be accepting a large loss. Alternatively you can look at what combination of other options you can sell that have the same overall value as this CC. Ideally these options would have a greater likelihood of expiring out of the money.

So for example 13 x Sep10 665/715 BPS or 10 x Sep10 750/780 BCS were each worth around $5,800. Selling something like these would effectively allow you to roll the 680CC to something that may have a better chance of expiry. It's possible to achieve this in the current week but typically needs to be done very early in the week when premiums are high.

However there is still plenty of risk associated with this approach and you need sufficient margin and buying power to do the trade. Another approach is to use revenue from other option sales to pay for progressively better rolls until the CC is OTM, although this can take longer. You will need to analyse the options available to you and decide what's best in your individual situation.

 

[CrunchyJello]

Very interesting you mentioned this. Today is the first day my son's CAD TFSA (aka US Roth IRA) was activated . Gave him $6k (the max annual contribution limit allowed) this morning and he now has 6 TSLA @729 to start his journey.

You can trade options in a TFSA?!

 

[ammulder]

I think level 3 at Etrade is sufficient for that. Level 4 adds the ability to write naked calls.

(Sorry for the super giant image)

 

[juanmedina]

I still don't have a portfolio margin account. It scares me .