A way to go yet - I've €406k, but that's split, €324k in common shares, in personal account, now €82k in my company "play" account. Well on paper, I need to sell my current options, which will likely do next week as they're both now ITM, and try this new strategy.
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A way to go yet - I've €406k, but that's split, €324k in common shares, in personal account, now €82k in my company "play" account. Well on paper, I need to sell my current options, which will likely do next week as they're both now ITM, and try this new strategy.
Posting this here because @KarenRei 's response confused me a little bit and responses tend to get lost in the main forum with the number of pages added every day.
I was thinking holding calls closer to expiration is the best strategy, but my experience is not as deep as the good folks here. Plus I realized I have lot more ITM calls which may benefit from some 'not-an-advice' advice
I went on a buying spree with call options back in October, just before ER. Just turned out to be a lucky guess on best time to buy. Although a few of the December options expired worthless, everything else is looking great. I have the following that are deep ITM (between 2 to 10 options on each)- will they be getting difficult to sell? Should I just see them off now and either buy more stock or longer options? Taxes are not a concern for this account as it is IRA.
1 option for Feb 7 @ $420 which I am considering exercising to get the stock at 420
Feb 21 @ $470
March 20 @ $410
Sept 18 @ $425
So, sell them, hold them or roll over to longer. If roll over, what should I consider buying, all TSLA options are trading at incredibly high prices right now.
BTW, my overall goal is to build a nice strong stock position that will be for long term hold. I am half-way there already.
I was thinking holding calls closer to expiration is the best strategy, but my experience is not as deep as the good folks here. Plus I realized I have lot more ITM calls which may benefit from some 'not-an-advice' advice
I went on a buying spree with call options back in October, just before ER. Just turned out to be a lucky guess on best time to buy. Although a few of the December options expired worthless, everything else is looking great. I have the following that are deep ITM (between 2 to 10 options on each)- will they be getting difficult to sell? Should I just see them off now and either buy more stock or longer options? Taxes are not a concern for this account as it is IRA.
1 option for Feb 7 @ $420 which I am considering exercising to get the stock at 420
Feb 21 @ $470
March 20 @ $410
Sept 18 @ $425
So, sell them, hold them or roll over to longer. If roll over, what should I consider buying, all TSLA options are trading at incredibly high prices right now.
BTW, my overall goal is to build a nice strong stock position that will be for long term hold. I am half-way there already.
Posting this here because @KarenRei 's response confused me a little bit and responses tend to get lost in the main forum with the number of pages added every day.
I was thinking holding calls closer to expiration is the best strategy, but my experience is not as deep as the good folks here. Plus I realized I have lot more ITM calls which may benefit from some 'not-an-advice' advice
I went on a buying spree with call options back in October, just before ER. Just turned out to be a lucky guess on best time to buy. Although a few of the December options expired worthless, everything else is looking great. I have the following that are deep ITM (between 2 to 10 options on each)- will they be getting difficult to sell? Should I just see them off now and either buy more stock or longer options? Taxes are not a concern for this account as it is IRA.
1 option for Feb 7 @ $420 which I am considering exercising to get the stock at 420
Feb 21 @ $470
March 20 @ $410
Sept 18 @ $425
So, sell them, hold them or roll over to longer. If roll over, what should I consider buying, all TSLA options are trading at incredibly high prices right now.
BTW, my overall goal is to build a nice strong stock position that will be for long term hold. I am half-way there already.
To be fair I don’t think there is a “correct” piece of advice that can be offered by anyone. We don’t know what happens to the share price in future any more than you do, so any thoughts on what you should do should be based on your own assumptions about what you think the share price will do.
If you were willing to state where you think the share price will be in future, then maybe you might get good suggestions about the best way to proceed based on your assumed share price target.
you also should state your risk profile - are you prepared to lose 100% of your option value if you are wrong?
If there's a bigger drop, you can sell covered calls on the way down, BUT only at a far OTM strike. For example, if you sell a put at $640 this week, the stock drops to $550 somehow and you get assigned, if you then sell a covered call @ $560, you risk losing money, because you'd be getting assigned shares @ $640, and shares could get called away @ $560. In case of such a huge drop, you'd be selling covered calls around $640, and pocketing very little in premium until the stock runs up again.
Basically, your strategy is guaranteed to make money (if TSLA bull case is correct), BUT it only makes you a lot of money if the stock doesn't move too much too quickly. In case of large downwards volatility you make slightly more money than buying and holding, but VERY little because the calls you'll be selling are way OTM strike prices. In the case of large upwards volatility, you'll be missing out on loads of gains compared to simply holding shares and a shares + call options strategy.
So there are two good reasons to employ your strategy:
- You believe the stock is not going to be very volatile in the near term. In this case, the money you make from decaying theta is going to be the optimal strategy that nets you more money than anything else.
- You believe there's large near term downside risk, but you don't want to go full on short TSLA. If this turns out to be true, you'll make a little bit more than just buying and holding, because of small premiums and getting shares assigned at a lower price than if you had just bought and held.
Agreed - there is no right or wrong here. Just trying to understand how the value of options changes as they get deep ITM and closer to strike prices. I am expecting the price to keep going up - with volatility. The volatility does not scare me and I still consider myself to be a newbie at options to a large extent, still learning about the mechanics of it.
My risk tolerance is high, mainly since my TSLA holdings are still about 33% of my total portfolio even after the current run up in price. Of these, about 60% is owning TSLA shares, and remaining 40% is in options. So if the options were completely wiped out, I would be sad that TSLA did poorly, but financially would survive it fine. I am about 15 years away from retirement, so there is time to recover. Of course, if TSLA goes to $6000 in the next 5 years, I may just retire early.
Seems the tax when you have €500k is 0.15%, so that's not going to keep me awake at night
But I can get around this for a while also buy getting the wife to open a trading account and transfer some there
So some headroom yet!
Plus wifey's talking about buying a house at some point. I told her I didn't want to sell all the $TSLA at $2000 as we'd miss-out on a lot of growth, but I said I'd be OK to perhaps sell half and take a mortgage on top. Thus seems like a sensible approach. even better would be to get a 100% mortgage with the shares as security, but that's to be investigated further...
Tax on securities accounts. What you need to know.
I checked with my accountant and it seems the €500k tax rule was repealed the beginning of 2020.
As for company, it gets taxed as profits, so 10% up to €100k, then 25% after that. My company makes a healthy profit annually too, so I'd best make some expenses!
As regards transferring to my personal account and trading options there, he says that it would be viewed as speculation so would likely be taxed, so no gain from doing that. Conclusion, I'll pay some tax...
I'm looking for some not-an-advice from more experienced option traders, as I've historically only been a "buy and hold only" type of person:
My 2% options bet from a few weeks ago has now become ~14% of my entire profile's worth. The positions expire in July, with strikes of 800, 900, and 1000.
How do you all handle the risk v. reward when an option blows up way past your original allotments, especially when you are extremely confident in your investment? Are there any timeframes that start to worry you, even if you're confident in the company? (Also in a non-tax advantaged account, but selling won't bump up my marginal tax bracket for the year). Opportunity cost is probably profit taking (paying off Model 3 loan) if not re-investing. Are there any strategies that could turn this into a long-term capital gain, other than hoping they go ITM and exercising?
I realize this forum will be slanted toward riding the rocketship, but still interested in hearing opinions.
My 2% options bet from a few weeks ago has now become ~14% of my entire profile's worth. The positions expire in July, with strikes of 800, 900, and 1000.
How do you all handle the risk v. reward when an option blows up way past your original allotments, especially when you are extremely confident in your investment? Are there any timeframes that start to worry you, even if you're confident in the company? (Also in a non-tax advantaged account, but selling won't bump up my marginal tax bracket for the year). Opportunity cost is probably profit taking (paying off Model 3 loan) if not re-investing. Are there any strategies that could turn this into a long-term capital gain, other than hoping they go ITM and exercising?
I realize this forum will be slanted toward riding the rocketship, but still interested in hearing opinions.
jeewee3000
Active Member
Helpful, thanks.
I only invest/trade with a personal account, where there are - to my knowledge - no taxes on options as long as you are not a professional trader. So speculation is fine if you're small time, like me.
I'm not 100% convinced on that. Long share-holding yes, that 's OK, but I got the impression from my accountant that options trading might be viewed as speculation but the authorities and might be tax liable.
I can only advise you check it out for yourself. Please let me know if you discover anything.
jeewee3000
Active Member
Lol I googled it before posting to you and found assuring sites that said what I said.
But it might be more complex than that
. I'll ask my accountant next time I see him.
Follow on question for @ggr and others with more experience than me
I am still having trouble grasping the concept of time value and *925
accepting that it is always better to sell options and buy shares with the proceeds
So let me explain my current scenario (tax defered account, overall goal to bring my TSLA long term stock holding to 1000 shares)
I currently hold 2 options with September 18 expiry strike price $425. I bought these at $18.51 with total cost basis of $3701. Current value of these options is 107000 are at last transaction of $535
If I decide to buy these options today, or anytime before expiration, I will need to pay $85,000 to get 200 shares of TSLA. My cost basis would be $88,301 or $441 per share. Immediate value of these shares would be $189,000 (assuming a closing price of $945)
If I sell these options and then buy shares, with the same 85K addition = 107000+85000 = 192000 = 203 shares.
The difference now seems to be very little - is it because they are so deep in the money? Or is it because the time value is completely gone now? or both
(I am a scientist by training, PhD in lifesciences, its difficult to comprehend the financial numbers easily)
I am still having trouble grasping the concept of time value and *925
accepting that it is always better to sell options and buy shares with the proceeds
So let me explain my current scenario (tax defered account, overall goal to bring my TSLA long term stock holding to 1000 shares)
I currently hold 2 options with September 18 expiry strike price $425. I bought these at $18.51 with total cost basis of $3701. Current value of these options is 107000 are at last transaction of $535
If I decide to buy these options today, or anytime before expiration, I will need to pay $85,000 to get 200 shares of TSLA. My cost basis would be $88,301 or $441 per share. Immediate value of these shares would be $189,000 (assuming a closing price of $945)
If I sell these options and then buy shares, with the same 85K addition = 107000+85000 = 192000 = 203 shares.
The difference now seems to be very little - is it because they are so deep in the money? Or is it because the time value is completely gone now? or both
(I am a scientist by training, PhD in lifesciences, its difficult to comprehend the financial numbers easily)
Ditto. Same confusion (and same professional training incidentally, cheers). Although, I guess I'm dealing with a taxable account. It seems like the short-term capital gains erase the time premium, so if you intend to hold shares long term it seems to make sense to exercise? Anyhow, I'm sure there's a lot of nuance I don't appreciate.
I have similar questions about the March expiry @410 strike price. The numbers end up even closer there. It is emotionally attractive to see a lower cost basis on the actual shares purchased.
For my taxable account, I only buy very long term options or straight stock and hold for atleast an year. Paying short term gains negates most gains below 40% for me.
pz1975
Active Member
For those of you sitting on huge gains in near-term OTM calls, consider selling some covered calls against them for this week way OTM. For example, I sold 30 $1,400 calls expiring this week for $8.25 each. The IV is crazy. I either pocket the $25,000 premium if they expire Friday or if they go in the money, I will still profit $1.8 million on the underlying calls I sold them against. And the sold ones will go down way faster in value than the ones I hold in case I decide I want to sell them before Friday.
Yes, the difference is so little because the calls are now deep in the money. And this does change the equation if the account is taxable, since exercising the call gets you the lower cost basis, and a year (and a day) later you can sell the stock which will incur only capital gains tax, not income tax. In a non-taxable account you still got an extra 3 shares by selling the call and buying the stock.
(I am of course referring only to US tax law here.)
Has anyone tried selling DITM calls as a way to lock in some profits for other calls that aren't yet long term gains?
For example, if you have Jan21 $500 call that you've held for 11 months and are now DITM. You want to deleverage and lock some profits but want to wait one month until it's long term cap gain. So you sell a Jan21 $600 call. Then in 1 month close out both positions and lock the long term cap gains on the $500 strike.
For example, if you have Jan21 $500 call that you've held for 11 months and are now DITM. You want to deleverage and lock some profits but want to wait one month until it's long term cap gain. So you sell a Jan21 $600 call. Then in 1 month close out both positions and lock the long term cap gains on the $500 strike.
if you bought the call options on T, exercise the calls on T+60, for example, the cap gains timer on your stock position resets to zero. that stock needs to be held for 365 more days to become LT vs ST gain
Are you able to explain this in greater deal? l understand selling covered calls on shares i own. But what happens if i sell a covered call on a Jan 2022 Leap an the covered call gets exercised? Can i offset them?
pz1975
Active Member
Because your covered call is at a higher strike price than the LEAP you own, if someone exercises the sold call (obviously once it is in the money), you could either exercise the LEAP you own to offset the shares you have to sell, or (better) buy the shares back on the market and sell the LEAP. The latter is better because you earn more by selling the LEAP than exercising it because you earn the time value (theta) remains on the option.
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