Wiki Selling TSLA Options - Be the House

[Yoona]

I've flirted with this idea as well, and gave it a try. But I think I will stick with this advice from now on:

Most beginner options traders try to “leg into” a spread by buying the option first and selling the second option later. They’re trying to lower the cost by a few pennies. It simply isn’t worth the risk.

Sound familiar? Many experienced options traders have been burned by this scenario, too, and learned the hard way.

Don’t “leg in” if you want to trade a spread. Trade a spread as a single trade. Don’t take on extra market risk needlessly.

For example, you might buy a call and then try to time the sale of another call, hoping to squeeze a little higher price out of the second leg. This is a losing strategy if the market conditions take a downturn because you won’t be able to pull off your spread. You could be stuck with a long call and no strategy to act upon.

If you are going to try this trading strategy, don’t buy a spread and wait around hoping the market will move in your favor. You might think that you’ll be able to sell it later at a higher price, but that’s an unrealistic outcome.

Always treat a spread as a single trade rather than try to deal with the minutia of timing. You want to get into the trade before the market starts going down.

Source

i bookmarked those 10 tips on the link, thanks!

 

[InTheShadows]

Portfolio margin is a risk based margin account. Instead of requiring full (lvl 1 margin) or reduced (lvl 3) collateral, it calculates margin based on how likely the option will go ITM. As such, a -400p will require substantially less than 4/6 the margin a -600p would require. The result is that while naked puts will cost much less margin to open, spreads dont enjoy the same reduction as in a normal margin account since the long leg reduces the margin by a (sometimes much) smaller amount proportionally compared to the short leg.

Furthermore, it also calculates margin using a stress test based on a -30% / +30% (or 40%/50% depending on the volatility) move in the underlying. This is in contrast with a normal margin account where a total loss forms the basis for the calculation.

So you are saying if I sell a delta -10 put spread with the insurance put $100 away they would let me use a lot more margin because it is so likely to expire worthless? Like the 99% ones we were discussing the other day?

 

[InTheShadows]

I have, yes and was in that situation a few weeks back too, did no harm at that moment in time, though it feels. little unnatural...

But then, TBH, I'd be tempted to already flip to next week for the more juicy $14, in fact I would go to p740's for $16

Yes, let's do that instead, this is boring as hell, will just be sure to leave some margin

Edit: OK: for next week STO 20x p720 @$10.20 & 25x p740 @$16.13

Now that’s what I call an I dare you spread.

 

[dl003]

So you are saying if I sell a delta -10 put spread with the insurance put $100 away they would let me use a lot more margin because it is so likely to expire worthless? Like the 99% ones we were discussing the other day?

Yes, compared to a lvl 1 margin account. It's more or less comparable to a lvl 3 margin account (also called an advanced margin account) where only 20% of the collateral is held. However, the more you sell, the worse it gets as the risks posing to your account would get progressively higher. This is not a big issue, though, because you can spend $5 on a weekly 400 put to give yourself back $6k of margin. You can buy as many as you please regardless of the number of short puts open, up to a point where it no longer reduces margin. This is a feature unique to a portfolio margin account AFAIK. My friend tested it on an advanced margin account and it didn't do anything outside of a spread.

 

[InTheShadows]

i bookmarked those 10 tips on the link, thanks!

Haha. My trading spreadsheet now has a new sheet called TMC option geniuses.

 

[UltradoomY]

Just an observation and slight OT prediction.
Next week is a holiday week, so weekend Theta burn is more pronounced.
A TON of people take the whole week off including hedge fund managers and institutional buyers/sellers.
I see a ripe opportunity for MM's (who never sleep) to manipulate the share price down aggressively on Wednesday through the end of the week.

This is money well spent for them, because if they can keep the price down through 09/10 expiration that sets up the triple witching week for easier manipulation.

Current MP for 09/10 is $720 - I would expect that to come down
Current MP for 09/17 is $660
It makes sense to try and tackle the imbalance on a short week to move under the calls at $700 for 09/17 that are currently at 45k contracts but will go up as options are rolled out from this week and next.

Again, just musings but I think there is some truth there and I will be looking to play accordingly this Friday.

 

[stealthyc]

...unless macros absolutely get wrecked.

Famous last words

Just an observation and slight OT prediction.
Next week is a holiday week, so weekend Theta burn is more pronounced.
A TON of people take the whole week off including hedge fund managers and institutional buyers/sellers.
I see a ripe opportunity for MM's (who never sleep) to manipulate the share price down aggressively on Wednesday through the end of the week.

This is money well spent for them, because if they can keep the price down through 09/10 expiration that sets up the triple witching week for easier manipulation.

Current MP for 09/10 is $720 - I would expect that to come down
Current MP for 09/17 is $660
It makes sense to try and tackle the imbalance on a short week to move under the calls at $700 for 09/17 that are currently at 45k contracts but will go up as options are rolled out from this week and next.

Again, just musings but I think there is some truth there and I will be looking to play accordingly this Friday.

I actually quite agree with this outlook, despite the fact that I don't fully believe in the level of manipulation everyone here seems to ascribe to.

 

[Tslynk67]

Just an observation and slight OT prediction.
Next week is a holiday week, so weekend Theta burn is more pronounced.
A TON of people take the whole week off including hedge fund managers and institutional buyers/sellers.
I see a ripe opportunity for MM's (who never sleep) to manipulate the share price down aggressively on Wednesday through the end of the week.

This is money well spent for them, because if they can keep the price down through 09/10 expiration that sets up the triple witching week for easier manipulation.

Current MP for 09/10 is $720 - I would expect that to come down
Current MP for 09/17 is $660
It makes sense to try and tackle the imbalance on a short week to move under the calls at $700 for 09/17 that are currently at 45k contracts but will go up as options are rolled out from this week and next.

Again, just musings but I think there is some truth there and I will be looking to play accordingly this Friday.

Thanks, didn't realise Monday was a holiday in the US - will be sure to sell some CC's on Friday to take advantage of the free theta - don't really care about the Hedgies fvcking about, they're going to do that regardless...

 

[adiggs]

Thanks, didn't realise Monday was a holiday in the US - will be sure to sell some CC's on Friday to take advantage of the free theta - don't really care about the Hedgies fvcking about, they're going to do that regardless...

Lol - I didn't realize it either

 

[AxlxA]

Since we're at the top of the channel, I wanted a trade that can profit from a big drop, but didn't want any upside risk - this one looked interesting. Do you guys ever do butterflies like this?

9/24 Ratio Butterfly
+ 720P x 50
- 710P x 150
+ 700P x 100

Assumption:
The stock will swing back to the lower boundary of the channel sometime in the next 3 weeks, but not break below.

Plan:
Close the bear side at 80% profit (11.5k) and let the bull side expire worthless (24.5k), for a total of 56% RoC

If TSLA never dips:
Still a 25% RoC - no risk to the upside

I'm analysing this trade because it looks genius move ... What happens during the weeks as it dips. Like like say next week Friday we are at $715. Does it show a loss or still profiting.

 

[phantasms]

So even though the market is closed on Monday that time is baked into the option price anyway? Might have to close Friday and open a few 800s for next week.

 

[InTheShadows]

Thanks, didn't realise Monday was a holiday in the US - will be sure to sell some CC's on Friday to take advantage of the free theta - don't really care about the Hedgies fvcking about, they're going to do that regardless...

I’ve read that you don’t really get any free Theta for the weekends and holidays. The market knows how many trading days are left between expiration and today and adjusts the theta accordingly.

Maybe we can test it this weekend by looking at something boring like KO to see what next weeks atm call is and see if it looses that or 3x that on Tuesday.

 

[InTheShadows]

Someone on here mentioned a few weeks ago about having a brokerage account for their business. First of all, thank you for the idea. I have one now too and my funds cleared today.

On to the next order of business. How do you record the transactions in your books? I was thinking of making an income account “investment activity” and connecting the transactions to that account. I know stocks only get recorded when opened and closed. I’m just not sure how one would record short puts and spreads.

I have already duplicated my trading journal so I can keep one for the business too. This is where I will do all my investment analysis. I just need something for QuickBooks and to keep my reports semi accurate.

 

[ReddyLeaf]

Someone on here mentioned a few weeks ago about having a brokerage account for their business. First of all, thank you for the idea. I have one now too and my funds cleared today.

On to the next order of business. How do you record the transactions in your books? I was thinking of making an income account “investment activity” and connecting the transactions to that account. I know stocks only get recorded when opened and closed. I’m just not sure how one would record short puts and spreads.

I have already duplicated my trading journal so I can keep one for the business too. This is where I will do all my investment analysis. I just need something for QuickBooks and to keep my reports semi accurate.

Here’s the thread. It’s pretty active and contains lots of great info.
Professional Trader Status

 

[Cherry Wine]

Just an observation and slight OT prediction.
Next week is a holiday week, so weekend Theta burn is more pronounced.
A TON of people take the whole week off including hedge fund managers and institutional buyers/sellers.
I see a ripe opportunity for MM's (who never sleep) to manipulate the share price down aggressively on Wednesday through the end of the week.

This is money well spent for them, because if they can keep the price down through 09/10 expiration that sets up the triple witching week for easier manipulation.

Current MP for 09/10 is $720 - I would expect that to come down
Current MP for 09/17 is $660
It makes sense to try and tackle the imbalance on a short week to move under the calls at $700 for 09/17 that are currently at 45k contracts but will go up as options are rolled out from this week and next.

Again, just musings but I think there is some truth there and I will be looking to play accordingly this Friday.

Another thought on this - August China sales (due out around next Wednesday) will provide an excellent opportunity for FUD next week. A Twitter handle with fairly reliable information reported that August CN sales were around 10.4k, which is up month-over-month but down significantly from the same month in Q2'21 (May '21 was at ~33k sales) as Tesla shifted all its export activity out of Shanghai this quarter (as discussed on the Q2'21 earnings call in July).

 

[ChefBoyardee]

I'm analysing this trade because it looks genius move ... What happens during the weeks as it dips. Like like say next week Friday we are at $715. Does it show a loss or still profiting.

The one I posted shows losses as the stock goes down until the last few days because I had a high ratio of bull spreads, but if you tweak the ratio you could create one that has roughly 0% gain/loss to the upside, and has gains as the stock goes down (unless it drops too fast or too far)

More bearish variation here:

| Options Profit Calculator

Calculator shows projected profit and loss over time.

opcalc.com

 

[PastorDave]

Another thought on this - August China sales (due out around next Wednesday) will provide an excellent opportunity for FUD next week. A Twitter handle with fairly reliable information reported that August CN sales were around 10.4k, which is up month-over-month but down significantly from the same month in Q2'21 (May '21 was at ~33k sales) as Tesla shifted all its export activity out of Shanghai this quarter (as discussed on the Q2'21 earnings call in July).

I'm more concerned about the 1 week shutdown that was part of that tweet. I think the china numbers, assuming this account is accurate, won't scare the market because they were even worse in July (8k-ish)than the 10k it's claiming for August, and this had no effect on the stock:

Tesla sales cratered in China, but investors don't seem to mind

Tesla sales dropped sharply in China, according to a trade group report, suggesting it is losing ground in the world's largest market for both traditional and electric vehicles.

www.cnn.com

 

[Buckminster]

Pretty robust call walls at 735, 745 & 760 next week.

Should I roll my 750s to 750 again?

 

[buttershrimp]

Just an observation and slight OT prediction.
Next week is a holiday week, so weekend Theta burn is more pronounced.
A TON of people take the whole week off including hedge fund managers and institutional buyers/sellers.
I see a ripe opportunity for MM's (who never sleep) to manipulate the share price down aggressively on Wednesday through the end of the week.

This is money well spent for them, because if they can keep the price down through 09/10 expiration that sets up the triple witching week for easier manipulation.

Current MP for 09/10 is $720 - I would expect that to come down
Current MP for 09/17 is $660
It makes sense to try and tackle the imbalance on a short week to move under the calls at $700 for 09/17 that are currently at 45k contracts but will go up as options are rolled out from this week and next.

Again, just musings but I think there is some truth there and I will be looking to play accordingly this Friday.

FWIW, I’ve noticed a 2 day pattern prior to 3 day weekend 2 years in a row now (for Memorial Day in this example) … basically a big surge of buying Thursday in the last hour of the market hours, followed by a FRIDAY 3 pm ET dump prior to weekend. Papafox thread has great historical data on these 3 day weekends. I certainly am looking forward to a late week last day dump to sell BPS. I guess that means maybe good idea to roll BCS prior to end of week. Hmmm

 

[buttershrimp]

Pretty robust call walls at 735, 745 & 760 next week.

Should I roll my 750s to 750 again?

As your Wu Tang financial advisor…. Diversify yo bonds