Wiki Selling TSLA Options - Be the House

[MikeC]

Split-rolled forward a couple 12/30 -p210/130 to 2x 12/2 -p200/160 and 2x 12/9 -p197.50/157.50.

Sold 12/2 197.50 CC to bring some BPS down to -p197.50 to make a straddle.

Feeling pretty bullish after recovering from the 160s on high volume, now heading into last month of the quarter with no shutdowns yet. I gave up on buying calls but I'm really trying not to sell any more. 6-12 months from now I'm sure I'll wonder wtf I was thinking selling calls under 200.

 

[BornToFly]

The big risk I see is to the downside with China. News about lockdowns, etc., could crash the stock. I don’t see a similar surprise/risk to the upside although we all expect higher in the future. Elon would have to deliver some cybertrucks Thursday with the semis….

 

[dl003]

I've got to say, guessing how high we'll go is a lot less stressful than guessing how low.

 

[Cherry Wine]

Have no fear those of you with CCs, we now get an Elon/Apple feud to overshadow any rally.

 

[juanmedina]

Have no fear those of you with CCs, we now get an Elon/Apple feud to overshadow any rally.

A war that we will end paying for :

https://twitter.com/x/status/1597302404239659008

 

[Chenkers]

On Wednesday at noon, Powell will give a speech. SPY has a tendency to get crushed on the days when he speaks. Knowing this, I think (a) big boys don't want to give retail shorts a chance to profit off TSLA on Wednesday so they're squeezing them now and (b) this further affirms that 166 is the bottom.

You don't have to wait for Powell to speak when all you need is Bullard to crash the market. The Fed's Bullard was speaking at 12pm on Marketwatch and the macros tanked as he started his usual hawkish spiel. (Williams was also speaking but didn't seem as hawkish). I was prepared for this and sold before midday but unfortunately closed out too early before the market started really digesting things and sank much further.

 

[adiggs]

Another example, if you don’t mind selling the shares and expect SP to rise further: roll from $190 to $200 on 12/2 — debit cost is currently $2.15, but you capture $10 in capital gains. Change the new strike price according to your SP prediction and needs.

Yes, but you're right.
Even if you're selling below your avg cost base (like I'm doing right now), you shouldn't only look at premiums when you're rolling a contract. A strike improvement will cut your losses should you get excercised as well.

One proviso to this thinking - the incremental gain (reduced loss) from improving the strike price only actually happens if you then take assignment at the new strike price (or some even later strike that is rolled into).

If the shares reverse and the rolled position finishes OTM (or gets closed early) then the strike change changed (improved) the risk profile, but is NOT incremental gain. Instead you took gains and transformed them into a better risk profile / strike. The better risk is its own reward, but it doesn't show up as profit or loss unless the option gets assigned.


So while it -IS- true that the better strike represents incremental gain, its incremental gain in an assignment situation only. Without assignment the overall gain is still limited to the net credit received.

 

[OrthoSurg]

A war that we will end paying for :

https://twitter.com/x/status/1597302404239659008

And again Elon saved my CCs for this Friday! The probability we close above 190 are getting thinner and thinner with Elon’s memes.

I found out last year Apple charged 30% of the app purchase price/subscription on the AppStore to the developpers when my kids wanted to play Fortnite on the iPad and Epic Games refused to pay the 30% and got booted from the App Store.
I think Elon Musk just realized he will have to charge $11 instead of $8 to have the same revenues or get booted from the App Store.

Seems like it’s Elon’s fight now.

 

[corduroy]

A war that we will end paying for :

https://twitter.com/x/status/1597302404239659008

And again Elon saved my CCs for this Friday! The probability we close above 190 are getting thinner and thinner with Elon’s memes

As long as Elon is running Twitter, it seems like selling ATM calls would be a no lose strategy.

 

[vikings123]

A war that we will end paying for :

https://twitter.com/x/status/1597302404239659008

lol I doubt Apple will do anything, it just looks like Elon is using anything and everything to keep Twitter in the limelight. At this rate Twitter MAUs will double before TSLA stock doubles

Interesting action today with TSLA showing strength in the morning fading with the macros. I imagine we continue to trade in this range until the next major economic event; ADP employment report on Wednesday and initial jobless claims on Thursday among other things.

 

[ZeApelido]

New Fully Automated Trading Algorithm:

1) Set immediate trigger whenever Elon sends a tweet.

3) Sell shares immediately

4) Buy shares back 15 minutes later when down 1%

5) $$$ Profit.

 

[vikings123]

2022	2021
New Fully Automated Trading Algorithm: 1) Set immediate trigger whenever Elon sends a tweet. 3) Sell shares immediately 4) Buy shares back 15 minutes later when down 1% 5) $$$ Profit.	New Fully Automated Trading Algorithm: 1) Set immediate trigger whenever Elon sends a tweet. 3) Buy shares immediately 4) Sell shares 15 minutes later when up 10% 5) $$$ Profit.

 

[JSML]

Margin call due to covered calls going ITM?

On Thursday I had 7 figures + of margin available. On Friday I received a margin call for $55K.

I made no moves in between, and the only portfolio move of significance was my covered calls (this week 177.5 strike) going ITM.

Does anyone understand the mechanics of this?

It’s not a lot, but since Fidelity technically “reserves the right” to meet margin calls at any time, I want to address and learn from it now, as I don’t ever want them to reach into my portfolio and sell positions.

My cost basis on the shares is far lower than the strike sold.

This has happen to me several times. I have TD, not Fidelity and I have portfolio margin. Not sure if yours will fall into the same category as mine.

It's usually a spike up in volatility that causes a change in the margin calculation. Instead of calculating margin required based on let's say a +/- 30% range of price movements, they change it to +/- 50% of price movements. For most of them, if I wait a day, the margin comes back because the volatility tamps down.

Another way I dealt with it is by closing a small percent of the CC's. Let's say 15% to 20%. That will get your margin in positive range immediately.

 

[mongo]

This has happen to me several times. I have TD, not Fidelity and I have portfolio margin. Not sure if yours will fall into the same category as mine.

It's usually a spike up in volatility that causes a change in the margin calculation. Instead of calculating margin required based on let's say a +/- 30% range of price movements, they change it to +/- 50% of price movements. For most of them, if I wait a day, the margin comes back because the volatility tamps down.

Another way I dealt with it is by closing a small percent of the CC's. Let's say 15% to 20%. That will get your margin in positive range immediately.

Covered calls (CC) shouldn't require margin though?

 

[dl003]

My internal dialogue looking at TSLA all day everyday

 

[JSML]

Covered calls (CC) shouldn't require margin though?

If you sell 1 to 1 then no margin required. If you use buy 1 sell 2, then margin is required. Sorry, wrong terminology. Extras can be considered sold naked calls.

 

[Jim Holder]

I am also with TD, sometimes if you have Puts as well the system marries the shares to them and the CC’s then appear naked. Best to call them and check it out. Ask for the margin risk team as sometimes the front line support, while excellent, are not really well informed about the intricacies of the backend plumbing that affects this.

Good luck!

 

[MrMoo]

If you sell 1 to 1 then no margin required. If you use buy 1 sell 2, then margin is required. Sorry, wrong terminology. Extras can be considered sold naked calls.

That's not 100% True. There is delta in the options too. Which is why you hear the term delta hedging. If the call is far enough OTM then it shouldn't effect the margin if you sell 2 or even 3 on 100 shares.

I'll give you an extreme example. You have 100 shares and sell 10 weekly OTM $500 strike price option. That most likely won't really effect your margin until the stock gets much closer to 500.

 

[ReddyLeaf]

Felt like the stock would run today so rolled my straddles up to -p/-c190s, kept at 12/30, so lost a few pennies on bid/ask slippage. Then my (in)saner-self decided that I might be wrong, so bought a bunch of shares to fill out another lot and decided to do a proper B/W, selling a single 12/30 -c160 at $31.60. Yup, that’s right, I’m daring those shorting hedgies to keep shorting. I’m still overweight CCs vs CSPs, with extra free cash (hence the B/W) plus enough extra for a 12/30 -p170 pair. Now, just need to allow time decay to continue. Still worried about the SP running too fast to keep up, so will roll up as needed. GLTA.

 

[Jim Holder]

Checking in for an objective take on my plan below in case what I’m seeking to do is dangerous/foolish and if there’s a better way to accomplish the same goal or similar:

Situation
I’m bag-holding 5,800 TSLA shares with a CB of around $309. Didn’t sell when all support began giving way until it was too late. Paid my dues!

Of the 5,800 shares, 1,900 were put to me recently at CB of $242 (12/16 266.66 CSP gone rouge) which added about $460k to my margin balance.

For various reasons I cannot sell shares at current prices and eat the losses. Plus I’m okay waiting this out even if it’s a year or two and converting them to a long-term investment and only sell some at new highs whenever they’ll come in order to pay off whatever margin is left (I’ll slowly pay it down with other income). But this means paying TD about $3k/mo interest on the margin, and some $$ for buying occasional garbage puts to protect my margin (and the risk if TSLA breaks below 130 which will put my whole portfolio in danger unless I buy even more puts, but maybe we’ve found a bottom and we’ll see 242 before 100).

Current Plan
Sell Covered Calls on the 5,800 shares while waiting out the famine. Locate 2-3 resistance levels above current share price and choose a weekly strike slightly above that (for instance 12/2 202.50, which is about 15-20 delta; 80-85% chance OTM) and sell 58x contracts (was selling for around $6-8k today), rinse and repeat every week (even scalp/BTC on dips along the way when possible) = around $15k/mo.

-Is this realistic?

-What are some ways you found that works for choosing a strike if you DIDN’T want your shares to be called away but you also want decent premiums/income?

-Would you do the same if you HAD to hold onto the shares? What would you different?

Thanks in advance!