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Paydirt's (TSLA) Option Investing Guide

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hershey101

Active Member
Jan 22, 2013
1,022
584
New York, New York, United States
Sold my October calls yesterday. They were October 16th 1,500 calls. I put in $1.4M and sold them for $2.7M, making a $1.3M profit. Thank you to the call sellers. Shaky plan is to sit out for a week and a half and reload maybe on August 28th, or possibly reload right after Labor Day. At that time I would buy ATM or 10% OTM October 16th calls and risk less than 10% of my capital.
Any interest in playing puts? Even small positions? Or not at all?
 
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juanmedina

Active Member
Mar 31, 2016
2,012
4,828
SC
Sold my October calls yesterday. They were October 16th 1,500 calls. I put in $1.4M and sold them for $2.7M, making a $1.3M profit. Thank you to the call sellers. Shaky plan is to sit out for a week and a half and reload maybe on August 28th, or possibly reload right after Labor Day. At that time I would buy ATM or 10% OTM October 16th calls and risk less than 10% of my capital.

I also sold my call yesterday but I end buying shares. When ever I sit on cash it never works out :(

Screenshot_20200819-143503.png
 
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paydirt76

Member
Jun 14, 2020
152
364
USA
Volatility in the options is too low for reasons already established, so if I did puts I would buy them. I'm not bearish though, I think stock is worth $2,300 without FSD, and FSD may be coming... so I am not going to gamble on a pullback by taking an overt bearish when I think stock just needs to cool off.

Options are a ticking time bomb, so I sold the Oct calls with that in mind. I'm hoping to buy October again maybe after Labor Day. I've made $8M on short-term calls in the past 8 weeks. But I did not play weeklies.
 

VQTRVA

Member
Mar 13, 2019
453
477
CVA
Question from a rookie OTM call only buyer: if my OTM call option went exponential, approaching 100 days from expiration and up 22x - is there a chance there will be no buyers on expiration day for it?

I have no plans to exercise the call option & purchase the underlying stock but I was just scanning some options chain & noticed that some deep ITM options had no volume on this Friday.
 

vikings123

Supporting Member
May 27, 2019
1,102
8,322
MN
Question from a rookie OTM call only buyer: if my OTM call option went exponential, approaching 100 days from expiration and up 22x - is there a chance there will be no buyers on expiration day for it?

I have no plans to exercise the call option & purchase the underlying stock but I was just scanning some options chain & noticed that some deep ITM options had no volume on this Friday.

With TSLA this is typically not a problem and pretty much never for OTM calls. Deep ITM calls are getting quite expensive so maybe interest for those will pick up after the split.
 
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mongo

Well-Known Member
May 3, 2017
13,033
39,213
Michigan
Question from a rookie OTM call only buyer: if my OTM call option went exponential, approaching 100 days from expiration and up 22x - is there a chance there will be no buyers on expiration day for it?

I have no plans to exercise the call option & purchase the underlying stock but I was just scanning some options chain & noticed that some deep ITM options had no volume on this Friday.
You should always be able to find a buyer by giving the option negative time value (price it less than 100 share price-strike).
More profitably, if there is a bid price, you can sell it. No volume just means no one cares enough to trade. I have some DITM that mess up my account balance due to being weeks since a trade/ price update.
 
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VQTRVA

Member
Mar 13, 2019
453
477
CVA
With TSLA this is typically not a problem and pretty much never for OTM calls. Deep ITM calls are getting quite expensive so maybe interest for those will pick up after the split.

I wish I had some TSLA calls alas - it's a juicy $500 Sept 21 AAPL call trading @ $70+ now.

Really my question is when is the call too expensive for potential buyers? Value of underlying stock + premium is $570/shr today & 389 days till expiration - is there a formula on when it is NOT worth it for me to keep cause it's too rich for any buyers?

You should always be able to find a buyer by giving the option negative time value (price it less than 100 share price-strike).
More profitably, if there is a bid price, you can sell it. No volume just means no one cares enough to trade. I have some DITM that mess up my account balance due to being weeks since a trade/ price update.

So basically price it cheap enough to lure bidders?
 

mongo

Well-Known Member
May 3, 2017
13,033
39,213
Michigan
Really my question is when is the call too expensive for potential buyers? Value of underlying stock + premium is $570/shr today & 389 days till expiration - is there a formula on when it is NOT worth it for me to keep cause it's too rich for any buyers?

The website Options profit calculator is great for running scenarios (though the IV side of things is up to you, I think) .

So basically price it cheap enough to lure bidders?
Yeah, if they are ITM, they have a value of at least 100 shares of stock - strike. Someone (or their algo-bot) will bite if you price low enough.
 
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bxr140

Active Member
Nov 18, 2014
2,859
4,268
Bay Area
Really my question is when is the call too expensive for potential buyers? Value of underlying stock + premium is $570/shr today & 389 days till expiration - is there a formula on when it is NOT worth it for me to keep cause it's too rich for any buyers?

FWIW, IMHO it is irrelevant what other buyers are interested in relative to contracts we're holding. Its the market makers with whom we're transacting anyway, and they're always willing to cut a deal. One can always sell at the bid and one can always buy at the ask. One might not like the spread, but its there for a reason. Eating much/most of the B/A spread in both directions is simply the price of trading options.

The formula for closing out long calls/puts is really the same as any other position--its all about where you are relative to your price targets (unless you're just going B&H with leaps). If you hit your underlying price target, close your position or at least tighten up your exit stop loss. There's no glory in a sharp downturn FOMOing away profit. If you're closing in on expiration (like, less than a month or so) but want to stay in the position, roll the contract(s) out a few months.
 
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vikings123

Supporting Member
May 27, 2019
1,102
8,322
MN
@bxr140 or @paydirt76 a question for you based on what I observed today.

IV was in the low 80s range last Friday. This morning as I was reviewing some numbers I noticed that had jumped to low 90s. And when I say morning I’m talking about pre market hours around 8 AM EST. Sure enough when regular hours trading opened there was more volatility then we have seen in the recent past with TSLA stock. Or maybe IV went up on last hour of trading on Friday and I did not notice?

Did the IV change because this is the last week of trading before the split? How did the IV suddenly gap up just like underlying stock? Thanks for responding.
 
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bxr140

Active Member
Nov 18, 2014
2,859
4,268
Bay Area
Did the IV change because this is the last week of trading before the split? How did the IV suddenly gap up just like underlying stock? Thanks for responding.

IV is a function of underlying movement, so it does make sense that it would go up with increased movement, and it makes sense that IV would gap off an overnight based on discontinuous calculations (as opposed to, say, futures). So, nothing seems to be out of place. Not sure if that answers the question.

For funsies, I plotted IV and standard 20 day BB (in this case, BBW) to show how they're kinda correlated in magnitude and direction.
upload_2020-8-25_14-10-33.png
 

Criscmt

Member
Feb 18, 2020
346
836
San Francisco
We have multiple events upcoming in a relatively short period of time, (in the next 45 days, Split, Batter Day, Perhaps S&P, and then Q3 results). Given this, is IV expected to go higher than the levels seen on Jul-13th?
 

MABMAB

Member
Jun 19, 2019
884
3,344
Mulligan's Valley
Volatility in the options is too low for reasons already established, so if I did puts I would buy them. I'm not bearish though, I think stock is worth $2,300 without FSD, and FSD may be coming... so I am not going to gamble on a pullback by taking an overt bearish when I think stock just needs to cool off.

Options are a ticking time bomb, so I sold the Oct calls with that in mind. I'm hoping to buy October again maybe after Labor Day. I've made $8M on short-term calls in the past 8 weeks. But I did not play weeklies.

your original plan was to own until inclusion. Nobody can fault taking a profit with such a supreme move but I wonder if you’ve left millions on the table by not holding?
 

vikings123

Supporting Member
May 27, 2019
1,102
8,322
MN
We have multiple events upcoming in a relatively short period of time, (in the next 45 days, Split, Batter Day, Perhaps S&P, and then Q3 results). Given this, is IV expected to go higher than the levels seen on Jul-13th?

In the past year IV was highest around the March drop and the next highest was during July. I guess there are too many catalysts in the near future to be able to predict how high it can go. In general though I do expect it to trend higher and potentially reach July highs.
 
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MaxPain

Member
Apr 6, 2018
25
82
Utah
your original plan was to own until inclusion. Nobody can fault taking a profit with such a supreme move but I wonder if you’ve left millions on the table by not holding?

My original plan was similar, but things changed with the split and the massive run up. The situation changed so I adapted my strategy and sold too...Sure I left money on the table, but didn't want to be a Pig
 

paydirt76

Member
Jun 14, 2020
152
364
USA
Question from a rookie OTM call only buyer: if my OTM call option went exponential, approaching 100 days from expiration and up 22x - is there a chance there will be no buyers on expiration day for it?

The computers are always watching every strike of the Tesla options. If you were go in with a limit order to sell at the midpoint of bid/ask, you may be able to get a fill, if you don't you can walk it down until they fill you.
 
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sayulita

Member
Aug 7, 2017
13
7
los angeles
The computers are always watching every strike of the Tesla options. If you were go in with a limit order to sell at the midpoint of bid/ask, you may be able to get a fill, if you don't you can walk it down until they fill you.

Are short term November calls in play? Or is it too expensive now?
 
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