Wiki Selling TSLA Options - Be the House

[CHGolferJim]

Does anyone here follow a strict approach to selling weekly covered calls? (Eg, sell 5% or 10% OTM each week, rinse and repeat). Or is it more of a “feel” approach, or something else?

If you want, you can check my recent posts about my latest strategy for 8-10 DTE +10% CC for the rest of the year and 1Q23. Just started a few weeks ago, but batting 1.000 so far. The 12/2 are at $195.

Although of course you can look like a champ when SP is trending down, when it turns positive it takes work to escape with profits.

 

[dl003]

If you go back to every major bounce / rally we've had in 2020 - 2022, you will have a hard time finding anything that began with such a clean impulsive pattern. This is super important as to "start things right", the first spike tells you a lot about what the rest will look like.

In EWT, there are 2 main types: motive and corrective. Motives set the trend while correctives are counter-trend. Obviously in a bear market, we don't want a rally to be corrective as that implies sooner or later, the downtrend will resume and new bottom will be made. There are a lot of corrective patterns but ONLY 1 begins with a 5 wave pattern such as the below example. Therefore, what played out today is hugely bullish for TSLA as it has overcome the first hurdle. Motives ALWAYS begin with a 5 wave sequence. While this still carries the risk of being a zig zag which will play out if, says, TSLA misses Q4 ER expectations, bulls are finally having the upper hand here.

What's next?

I'll repeat: I'm seeing this first leg topping out around 185-190 before pulling back to 175-170. Again, if you don't agree, go back and look at every major rally in the past. The first leg up always retraces deeply before going back up again. I don't care what you're looking at, from 2019 June crash to COVID crash to 2020 split crash to 2021 supply chain crash to 2022 Fed crash, no matter how strong the first spike is, it always retraces at least 50%. Expect it and plan around it.

Why do we have to pull back? We only rallied 17 points from the low and already a double bearish divergence can be observed on the 30m timeframe. Momentum is running out and we're due for a pull back, especially after all 5 waves have mostly played out.

Caveat: this is a small degree sequence. Looks to me like it's wave 1 of 1 of 5, 2 degrees removed from the typical big rally we often see. At this level, things can get a bit erratic. Says tomorrow Buffett says he's buying TSLA - we're going much higher. That's why I'm not planning my CC's around sequences of this degree. I'm only looking at the one above it, which gives me 195 as a safe strike. Max I see for big wave 1 of 5 is 225 before retracing to 195 at the minimum. Will I still hold on to my 200 CCs exp next week if Buffett says he's buying TSLA? Heck no. But most everything else can be managed just fine.

The beauty of a 5 wave sequence for starter is this: even if this is just the first leg of a zig zag, the retracement cannot extend beyond the previous low. It means once we've done pulling back, 200 will come before new lows, if any. I know this is of little comfort to many of us here, but this is a small victory regardless. We take it one day at a time. Wishing everyone a happy Thanksgiving!

 

[dl003]

For clarity, this is what big wave 1 of 5 would look like. I'm trying to avoid giving false hope. For illustration only. The last 2 days would only make up the tiny first leg of this wave so I find it amusing people are upset we might pull back to 175 lol.

And this is what all 5 big waves would look like if everything went according to plan

 

[Jim Holder]

For clarity, this is what big wave 1 of 5 would look like. I'm trying to avoid giving false hope. For illustration only. The last 2 days would only make up the tiny first leg of this wave so I find it amusing people are upset we might pull back to 175 lol.
View attachment 877739
And this is what all 5 big waves would look like if everything went according to plan
View attachment 877742

Thank you for the charts and for being so generous with your time to explain it all. It provides a big measure of comfort and clarity.

Are the upward waves still intended to work in a possibly depressed 2023 economy? Seems 300’ish in June 2023. For those of us with heavy bags of excess day-trading shares that we got caught holding with CB between $250-$350 it seems we have an off-ramp to readjust, just need to wait it out, is that what it’s showing?

Also, is it anticipated that there will be another 160–170 bottom last half of 2023 to re-enter once we went to cash?

Thank you again and happy Thanksgiving!

 

[dl003]

Thank you for the charts and for being so generous with your time to explain it all. It provides a big measure of comfort and clarity.

Are the upward waves still intended to work in a possibly depressed 2023 economy? Seems 300’ish in June 2023. For those of us with heavy bags of excess day-trading shares that we got caught holding with CB between $250-$350 it seems we have an off-ramp to readjust, just need to wait it out, is that what it’s showing?

Also, is it anticipated that there will be another 160–170 bottom last half of 2023 to re-enter once we went to cash?

Thank you again and happy Thanksgiving!

It's hard to say since we've only bounced for 2 days. IMO, TSLA is trading at a heavy discount due to reasons not relevant to the company's fundamentals. I use EWT for the following purposes:

a. To answer whether we have bottomed or not. If I can survive the bottom then whatever comes after can be easily managed, however long it'll take to go back to 300s. Today's rally indicates a bottom of some sort is in but a zig zag still can't be ruled out. EWT alone can't give me a definitive answer. I can see that the structure is very bullish but P&D and ER can change it in a blink of an eye. Other technical indicators can also tell me what kind of structure I'm looking at. Right now, not enough data. All I can say is we will see 200 before 166.
b. To identify where W2/B ends and W3/C begins so I can remove my hedges if we're going up or put them on if we're going down.
c. To gauge how good / bad it can get in order to pick proper strike prices. I can estimate how high the stock can go once big wave 2/B has ended, but even then it's still going to result in a big range. We're not there yet.

 

[OrthoSurg]

It's hard to say since we've only bounced for 2 days. IMO, TSLA is trading at a heavy discount due to reasons not relevant to the company's fundamentals. I use EWT for the following purposes:

a. To answer whether we have bottomed or not. If I can survive the bottom then whatever comes after can be easily managed, however long it'll take to go back to 300s. Today's rally indicates a bottom of some sort is in but a zig zag still can't be ruled out. EWT alone can't give me a definitive answer. I can see that the structure is very bullish but P&D and ER can change it in a blink of an eye. Other technical indicators can also tell me what kind of structure I'm looking at. Right now, not enough data. All I can say is we will see 200 before 166.
b. To identify where W2/B ends and W3/C begins so I can remove my hedges if we're going up or put them on if we're going down.
c. To gauge how good / bad it can get in order to pick proper strike prices. I can estimate how high the stock can go once big wave 2/B has ended, but even then it's still going to result in a big range. We're not there yet.

I think we have bottomed out.
That is what my 38 exercised short puts contracts told me the last 2 days.
Time to sell these shares sell these pits for 2025 and head back up again!

 

[dl003]

I think we have bottomed out.
That is what my 38 exercised short puts contracts told me the last 2 days.
Time to sell these shares sell these pits for 2025 and head back up again!

I hope so, too. I was very confident that 177 was the bottom based on RSI & MAC divergence and fib levels. It's easy to blame Elon and the hatestream media for the last leg down to 166 but the fact is I was taken by total surprise after thinking I got it all figured out. In my defense, the pattern, if this is truly the bottom, is a super tricky ending diagonal and would untie a few loose ends. 166 is only slightly more convincing than 177 for a bottom due to:

1. Momentum is just a tiny bit more exhausted
2. Sell volume tapered off a bit at the end
3. Closer to a confluence of super supports: 200 WMA, 0.618 all time fib level and the trendline shown below (red) but I guess you could say after a nearly $140 drop, 177 itself was pretty darn close

Bottom calling is tricky business, to say the least.

Zoomed in

Maybe this area was the ultimate target all along. Who knows.

 

[Jim Holder]

I hope so, too. I was very confident that 177 was the bottom based on RSI & MAC divergence and fib levels. It's easy to blame Elon and the hatestream media for the last leg down to 166 but the fact is I was taken by total surprise after thinking I got it all figured out. In my defense, the pattern, if this is truly the bottom, is a super tricky ending diagonal and would untie a few loose ends. 166 is only slightly more convincing than 177 for a bottom due to:

1. Momentum is just a tiny bit more exhausted
2. Sell volume tapered off a bit at the end
3. Closer to a confluence of super supports: 200 WMA, 0.618 all time fib level and the trendline shown below (red) but I guess you could say after a nearly $140 drop, 177 itself was pretty darn close

Bottom calling is tricky business, to say the least.

View attachment 877751

Is there a place for a new bottom at the end of 2023 in EWT?

 

[dl003]

Is there a place for a new bottom at the end of 2023 in EWT?

Anything can happen. EWT shouldn't be used to outright predict that far into the future. If Fremont burns down or Elon gets run over by a bus, there will be a pattern for it. What I can say is this:

1. Based on monthly RSI, we are the most oversold since June 2019
2. EWT is running out of patterns to assign toward more downside
3. Technical patterns says the same thing, huge falling wedge just begging to be broken out of
4. Double bullish divergence on the daily timeframe which typically results in huge bounces
5. The weekly candle is producing a super bullish reverse hammer

while the underlying business is firing on all cylinders. I told my members this is where they should take the risk and load shares. Now, if this was a shitty company, no chance. Risk management comes first, though. If you are in constant danger of getting margin calls, that's no good however attractive the price is.

 

[Jim Holder]

Anything can happen. EWT shouldn't be used to outright predict that far into the future. If Fremont burns down or Elon gets run over by a bus, there will be a pattern for it. What I can say is this:

1. Based on monthly RSI, we are the most oversold since June 2019
2. EWT is running out of patterns to assign toward more downside
3. Technical patterns says the same thing, huge falling wedge just begging to be broken out of
4. Double bullish divergence on the daily timeframe which typically results in huge bounces
5. The weekly candle is producing a super bullish reverse hammer

while the underlying business is firing on all cylinders. I told my members this is where they should take the risk and load shares. Now, if this was a shitty company, no chance. Risk management comes first, though. If you are in constant danger of getting margin calls, that's no good however attractive the price is.

Thank you!

You mention members, is there a membership group those of us who want can join?

 

[Max Plaid]

Who else thinks this was the signal to WS/Hedgies to reverse the stock, wipe-out retail shorts and put buyers?

 

[AquaY]

The same 245 Jan 20 2023 put? Will that make you whole from selling the 400 assigned shares at a loss?

Should make me whole or close to it. Possibly even small profit.
I held off on selling the shares and the put since I liked where the market was opening.
I should have done it though just to see exactly what it would have netted me

 

[AquaY]

I bought another 400 TSLA shares overnight, for the low low price of $293.33, bargain!
The PUTs had expiry of Jan.2023, early assigned just before the stock started rallying today.
Somebody knew something I did not apparently.

why would it benefit someone that " knew something" was going to pop Wednesday to exercise 293.33 puts?
If the stock dropped to 150 or rose to $240 He still gets paid $293.33.

The thing that changes is the Extrinsic value and most likely that made the extrinsic value greater after the pop. Could have still been irrelvant since t was so DITM with a shortish expiration date but I don't understand how assigning a put when you think the stock will rise the next day will benefit you.

 

[mongo]

why would it benefit someone that " knew something" was going to pop Wednesday to exercise 293.33 puts?
If the stock dropped to 150 or rose to $240 He still gets paid $293.33.

If they exercise, they sell 100 shares at $293.33 and can buy them back at $170. Either pocketing $123.33 a share or buying 70% more shares than they started with.
A rising stock price reduces put value. At $240 on expiration day, the put is worth only $53.33.
TSLA Long Put (bearish) calculator

 

[Knightshade]

Market participants were never given a choice to buy or not buy TSLA at 171 but trading is going to take place anyway at 173 because when the music is on you have to either dance or sit out. You can truly feel good only if you can see with your own eyes someone else is willing to buy TSLA at 171 when given the choice.

I appreciate the different analogy- but here is where I get lost.

Because in any rational mind, if someone was willing to buy at 173, you know for a fact they'd have been willing to buy at 171.


"Naah, I don't want to buy the thing I was gonna buy anyway for a higher price now that it's cheaper" said nobody ever.

I mean- I get markets aren't rational, this bit just seems especially so.

 

[CHGolferJim]

Just more speculation, but could Wednesday’s SP gain be partly related to likely 4th Qtr FSD revenues recognition?

 

[dl003]

I appreciate the different analogy- but here is where I get lost.

Because in any rational mind, if someone was willing to buy at 173, you know for a fact they'd have been willing to buy at 171.


"Naah, I don't want to buy the thing I was gonna buy anyway for a higher price now that it's cheaper" said nobody ever.

I mean- I get markets aren't rational, this bit just seems especially so.

Heres the dilema: if someone would have been willing to buy at 171, why didnt they buy the stock at 168 the day before? Why was the stock allowed to crash this far if there are so many people willing to buy it at 180 today?

These buyers can be divided into several categories:

. FOMO buyers
. Passive fund
. Algos
. Short covering
etc…

None of these people buy because they think the stock is worth 173-183. They buy because they have to, compelled by either a mechanism or emotion. If they werent rational enough to realize the stock was the steal at 166, would they stick their neck out and hold it even if it could not hold these levels?

The essence of the bolded questions above is this: there are 2 types of buyers: investors and speculators. One buys because they think its worth it, the other because they think it will go up. The former has grown to learn to not trust the latter. While the stock is in fact trading at 173+, self preservation is holding a few market participants back. We cant go higher until everyone is on board thats why gaps at this stage must be filled.

While this distrust is always present, it just grows much larger after a gap has been formed.

Now, the above is my reasoning but its also widely accepted by many traders and algos. As such, it has become a staple market mechanism.

 

[Max Plaid]

Just more speculation, but could Wednesday’s SP gain be partly related to likely 4th Qtr FSD revenues recognition?

TBH I don't think anyone outside of the core Tesla/TSLA community puts any value or pays any attention to FSD, except when it can be implicated in an accident, so no, I don't think so...

The Citi upgrade was notable as they are a long-time bear on the stock, plus Stan Jonas' "too much" comments - and regardless of all the efforts to blame Twitter antics for everything, Twitter looks to be just fine, with 25% of the staff and Elon in a very good mood, plus there might be a dawning realisation that Tesla don't need Musk present to execute and maybe there wasn't a China demand issue after all

Then once we got a bit of a run-up, puts started to get sold off, MM's start to hedge calls instead = buying shares and we get a Delta squeeze, not to mention some idiots that will have shorted the stock at $166, there are always some...

 

[BornToFly]

Explanation for the recent price action posted on Twitter:
I do think much of the SP drop was relentless shorting through Put buying.

https://twitter.com/x/status/1595747926839525377

 

[MikeC]

Explanation for the recent price action posted on Twitter:
I do think much of the SP drop was relentless shorting through Put buying.

https://twitter.com/x/status/1595747926839525377

It wasn't just MMs buying puts at the bottom - it was us buying back sold puts and buying protective puts. Not because the risk/reward made them a good idea but because we were squeezed by leverage. Then once the cycle exhausts itself, it goes back the other way and we get a good old gamma squeeze.

So tempted to sell more CCs on this initial recovery to buy back OTM BPS after what we've been through this year but I'm really, really trying not to get run over by the steamroller this time. Right now I feel like the meme with the monk and the prostitute is covered calls.