Wiki Selling TSLA Options - Be the House

[Max Plaid]

Yes, but the premium pays for the difference between the 150 strike and current stock price, plus another $8.

And you have. downside protection to $150... that's the point

Selling ITM cc's is the same as buying OTM puts, the difference is that the puts can go to zero, the calls you're guaranteed a profit on the initial investment

 

[BornToFly]

TSLA so weak compared to the QQQ. Pre-market gap down on everything took away a lot of the short plays in the market today. But if TSLA loses 182 it could go to 180 and possibly 177. Hopefully the market holds the 50 day MA this week and resumes bull rally next week. If not, TSLA most likely going into the 170s.

 

[Max Plaid]

TSLA so weak compared to the QQQ. Pre-market gap down on everything took away a lot of the short plays in the market today. But if TSLA loses 182 it could go to 180 and possibly 177. Hopefully the market holds the 50 day MA this week and resumes bull rally next week. If not, TSLA definitely going into the 170s.

All the recent volume evaporated, and looks like Hedgies targeting sub 185 for tomorrow

 

[Yoona]

• Tesla is trading in a confirmed downtrend, with the most recent lower high formed on Tuesday at $200.82 and the most recent confirmed lower low printed at the $177.12 mark on Nov. 9. On Thursday, Tesla looked to be printing a doji candlestick near the opening price, which could indicate a bounce is on the horizon.
• If Tesla bounces higher later on Thursday or on Friday, Thursday’s low-of-day may serve as a higher low, which would negate the downtrend. If that happens, traders can watch for big bullish volume to push Tesla up above $200, which would indicate the break down from the flag was a bear trap.
• If Tesla fails to gain bullish momentum and falls under $177, the downtrend is intact and a continuation of the bear flag break is likely. The measured move of the bear flag suggests Tesla could fall toward $163.
• Tesla has resistance above at $190.41 and $200.51 and support below at $177.59 and $166.71.

 

[adiggs]

And you have. downside protection to $150... that's the point

Selling ITM cc's is the same as buying OTM puts, the difference is that the puts can go to zero, the calls you're guaranteed a profit on the initial investment

To be clear - the guaranteed profit is for all share prices above $150. Should the share price drop to 130, as an example, then the $8 extrinsic you started with would take of the drop from 150 to 142. At $130 you'd have a $12 loss.

So not guaranteed - but some really good odds.


The only downside that I really found with buy-writes using ITM cc's at open was that the positions rarely had early exits. An early exit either means that the share price has gone up so much that the cc has ~0 time value, in which case the cc + shares are closed for the original extrinsic value.

Or it means that the share price has dropped so much that the cc has gone OTM, and then kept going down to very low price, though not necessarily approaching 0 time value. In this case you're taking a big gain on the cc ($8 plus the original ITM value - about $33 I think, or $41) while carrying some unrealized loss (183 - current share price: $130 in my made up example or $53).

For the most part I found that the lack of an early close was a benefit - it made it easy to ignore the position day to day until nearing expiration, and then close it out (or roll, or whatever I decided) in the last couple of days to expiration.

 

[kabin]

A good hedge for cash accounts with gains, breakeven at $142, about 22% downside protection, 77% POP, minimal shekels/month, and very limited upside of course. I might opt for nearer term calls that can be rolled out as IV grows but if I'm negative on the stock I'd rather sell some and buy it back later at a cheaper price.

 

[ReddyLeaf]

TSLA so weak compared to the QQQ. …….

Probably time to add TSLA to the Dow. Then it can better live up to its recent performance and the name “dogs of the Dow”.

In other news, rolled down and out a couple CCs and CSPs for credit. Again, getting tired of these buying opportunities, but bought another handful of shares in the $184s to fill out yet another round lot, and then immediately sold 12/02 -c190 at $6.80. This is in my small account which is now 100% shares and CCs 11/25 & 12/02 -c190s. Because of this, I’ve been more conservative on selling ATM CCs, so not getting as high of premiums. Hopefully I will eventually lose half of them and get back to the straddles.

Still have one -p190 for tomorrow which I might roll down or out, still trying to decide if I want the shares now or next week. Historically, Thanksgiving Friday has often been the start of the Santa Claus rally (or at least a local minimum and good time to buy), so maybe just roll to next week for another $2-$3 credit.

In the “good/bad” news department, if today all my CCs could magically expire worthless and all my puts were ITM and exercised, I would have reached my share goal in my retirement accounts. Of course, the bad news is that the crazy low SP is the reason. And the good news: the last time I was close was right before the Hertz news. This time I won’t stretch by selling long duration ATM CCs to bring in more premium, but will continue with the straddles, adjusting as needed and methodically picking up a handful of shares.

 

[juanmedina]

Buy shares at the current price, sell Jan 23 -c150's for guaranteed $8 profit?

I can't do this. I have all most no cash and 98% stock. I am thinking about going all cash at over $220 because I am not confident about next year. I don't think we can sustain a 50% delivery growth in a recession even with the Cybertruck ramping up but we shall see.

 

[OrthoSurg]

sry, i didn't bring my laptop/data on this vacation

Lucky you!
My last vacation was in March 2020 when we did a road trip to Washington DC just before they closed the border. I am about to allow back some vacation, I should not get margin called with all the money I transferred in my account.

Tomorrow I am selling CCs. There will be a bump. Cmon!

 

[Max Plaid]

To be clear - the guaranteed profit is for all share prices above $150. Should the share price drop to 130, as an example, then the $8 extrinsic you started with would take of the drop from 150 to 142. At $130 you'd have a $12 loss.

So not guaranteed - but some really good odds.


The only downside that I really found with buy-writes using ITM cc's at open was that the positions rarely had early exits. An early exit either means that the share price has gone up so much that the cc has ~0 time value, in which case the cc + shares are closed for the original extrinsic value.

Or it means that the share price has dropped so much that the cc has gone OTM, and then kept going down to very low price, though not necessarily approaching 0 time value. In this case you're taking a big gain on the cc ($8 plus the original ITM value - about $33 I think, or $41) while carrying some unrealized loss (183 - current share price: $130 in my made up example or $53).

For the most part I found that the lack of an early close was a benefit - it made it easy to ignore the position day to day until nearing expiration, and then close it out (or roll, or whatever I decided) in the last couple of days to expiration.

OK, but those are unrealised, paper losses, you can continue to write -c150's ad-infinitum on those for further profits, until the SP moves back up above 150, then flip the strike to the original purchase price and keep going...

At least that's how I see it

OK, thanks to the "pop" close to 186, completed my roll of 5x 11/18 -c195 to 5x 11/25 -p190 for net +$3, a good deal that required a good deal of patience, i.e. sold next week's puts on the dip, had to wait for the pop to rebuy this weeks - always a risk, but had all today and tomorrow to sort it out

 

[phantasms]

Sold my first put in a while, P176.67 for Friday. I apologize in advance for the global market crash.

I closed this for pennies of profit earlier today because of fear. Not selling puts, not selling shares, not selling calls, not buying shares. Maybe I just get the cash out of my account and walk away for a while. I know that is the smart thing to do but my emotion chip is on the fritz and I cannot shut it off.

 

[OrthoSurg]

Bought 10x 25/11 205CCs at 3:55PM
Will close at open tomorrow when it opens greens because it has to be green once in a week, no?

 

[dl003]

Market swatted the stock down every chance it got, "down, boy!" but I still struggle to see outsized risk : reward here for bears. Like I said a couple days ago, I expect sideway trading for the next month or so. This quarter, clearly sentiment has shifted from FOMO to caution. We might do this all the way into mid December. Can go up, and down again next week. Look at NFLX. I'm half expecting something similar.

 

[MikeC]

I'm no longer so bullish in the short-term but maybe that's a good contrarian sign. Wish I had been using CCs to improve my DOTM BPS this whole way down. Now that I am doing it the stock is probably going to take off, but anything is better than languishing down here (or lower).

Closed out 11/18 185/190/195/200 CCs that I opened to get my BPS down from 200 to 190. Then rolled the 11/18 2x -p190 down to 11/25 -p180 & -p175 using proceeds from 3x 11/25 190CC.

 

[Max Plaid]

I closed this for pennies of profit earlier today because of fear. Not selling puts, not selling shares, not selling calls, not buying shares. Maybe I just get the cash out of my account and walk away for a while. I know that is the smart thing to do but my emotion chip is on the fritz and I cannot shut it off.

Yeah, takes some nerve and resolve to trade this market, but it can be done

I'm still bringing in weekly realised gains above my target and sleeping at night. The key, small ATM positions, normally 5x, some calls, some puts -> easy to manage when they go the wrong way and by only deploying 5% of available contracts you have massive leeway for fixing things

And with 5x ATM puts or calls, no big deal if they get exercised early (never happened to me yet) or you just let them ride to exercise, or take the nice roll that ATM gives you every week

Setup positions you can live with being called or put -> is 500x TSLA @$185 much of a risk? I don't personally think so, and then you have the luxury to write -c185's, is selling 1000x TSLA @$180 a big deal? No, because I've some shares with a lowish cost-basis that I can use for burners, and then I can write puts down here without stress

Like all options strategies, it's working well until it doesn't, but the main thing is that when the stock decides to move out of this malaise, I don't have much at stake - unlike in the past when I'd write ATM against all my LEAPS and shares and/or cash, then have nowhere to go when they went DITM on a strong weekly move

Anyway, I'm waffling, not advice, as always

 

[intelligator]

And you have. downside protection to $150... that's the point

Selling ITM cc's is the same as buying OTM puts, the difference is that the puts can go to zero, the calls you're guaranteed a profit on the initial investment

I have 300 shares that I took assignment of at a cost basis of 237 when the price hit 190. Those shares caused a margin trigger; I pay interest to hold them. I have the long put that is increasing in value as we continue to drop. If I sell the protective put 3x Jun'23 250p for 23k or so and as an example sell 3x -c150 (would have to be for next week cuz I cant't trade an expiring security on the day it expires) , I can begin to claw back some of that lost value. I don't like having to do this but we keep sinking, the loss gap increases. Side benefit it is tax harvesting as well.

That's how I am thinking about this. Nuts to view it this way?

 

[OrthoSurg]

Last week when I was selecting my strike to sell CCs I contemplated selling ITM 180 CCs but reasoned myself that we were on a bull trend on SPY with positive CPI numbers and now PPI numbers. Seeing TSLA go down every day while SPY is on a short term bull run makes me want to puke. Because if we reverse SPY and macros are bad then we are heading down down down. It’s like nothing can help TSLA and it transformed from a retail favorite to the like of NKLA

 

[Discoducky]

Not nuts @intelligator. I've had thousands assigned shares and we'll be back above 237 and beyond once the macro gets its ducks in a row. Just remember, we are exiting a pandemic, sugar is going to be f'd up until the money flows to profit/growth. SPY strength is returning, VIX strength is lessening. The bull will return.

 

[Yoona]

I have 300 shares that I took assignment of at a cost basis of 237 when the price hit 190. Those shares caused a margin trigger; I pay interest to hold them. I have the long put that is increasing in value as we continue to drop. If I sell the protective put 3x Jun'23 250p for 23k or so and as an example sell 3x -c150 (would have to be for next week cuz I cant't trade an expiring security on the day it expires) , I can begin to claw back some of that lost value. I don't like having to do this but we keep sinking, the loss gap increases. Side benefit it is tax harvesting as well.

That's how I am thinking about this. Nuts to view it this way?

another way is to "repair the stock": getting paid to get rid of unneeded shares so that i can quickly go back to all-cash

i will probably do that tomorrow if sp doesn't rise

for ex, i bought shares @187.21 for temp B/W but the sp dropped to 183.17

if sp keeps dropping (for ex 170), i would rather lose the temp shares now (on breakeven or slight profit) than STO pure CC (11/25 -c187.5 @4.25) with the risk of holding the bag week after week after week on declining prems

for every 100 shares that i bought, i will sell CC plus Bull Call Spread on 1:2 ratio

• 11/25 +c182.50 x1, debit 6.65
• 11/25 -c185 x2, credit 5.30x2=10.60
• net credit 3.95

if sp at expiry >=185, all underwater shares @187.21 are gone

• sell 200 shares @185
• buy 100 shares @182.50 (and it gained 2.50, total 185)
• sell the original 100 shares @185 (i know, loss of 2.21/share)
• result is 395 credit minus 221 loss from original shares = 174 income AND i got rid of the underwater shares that would be a disaster to keep at 170 (cost basis 187.21) - what if sp lingers at 170ish for weeks?
• i got paid to lose the shares
• of course, i could have just waited for sp to rise into 187.21, but there is no guarantee of that; the 174 income is guaranteed
• if sp goes to 190 next week, (190-187.21)x100=279 opportunity income "lost" by not HODLing but no regrets in managing risk

if sp at expiry <185, everything expires and i have 395 income; keep repeating every week until all underwater shares are gone

 

[OrthoSurg]

another way is to "repair the stock": getting paid to get rid of unneeded shares so that i can quickly go back to all-cash

i will probably do that tomorrow if sp doesn't rise

for ex, i bought shares @187.21 for temp B/W but the sp dropped to 183.17

if sp keeps dropping (for ex 170), i would rather lose the temp shares now (on breakeven or slight profit) than STO pure CC (11/25 -c187.5 @4.25) with the risk of holding the bag week after week after week on declining prems

for every 100 shares that i bought, i will sell CC plus Bull Call Spread on 1:2 ratio

• 11/25 +c182.50 x1, debit 6.65
• 11/25 -c185 x2, credit 5.30x2=10.60
• net credit 3.95

if sp at expiry >=185, all underwater shares @187.21 are gone

• sell 200 shares @185
• buy 100 shares @182.50 (and it gained 2.50, total 185)
• sell the original 100 shares @185 (i know, loss of 2.21/share)
• result is 395 credit minus 221 loss from original shares = 174 income AND i got rid of the underwater shares that would be a disaster to keep at 170 (cost basis 187.21) - what if sp lingers at 170ish for weeks?
• i got paid to lose the shares
• of course, i could have just waited for sp to rise into 187.21, but there is no guarantee of that; the 174 income is guaranteed
• if sp goes to 190 next week, (190-187.21)x100=279 opportunity income "lost" by not HODLing but no regrets in managing risk

if sp at expiry <185, everything expires and i have 395 income; keep repeating every week until all underwater shares are gone

Did you have a graph or chart of the probability of TSLA closing green when we are over +1% pre market?

I am hesitant to STC at open my 10 calls I bought yesterday at close and then STO CCs for next week before MMD or wait at end of the day to do so.

Thanks!