Wiki Selling TSLA Options - Be the House

[adiggs]

Sleepless nights?
With a >650 strike price? That's 50% over the ATH in the next 8 months. I'd love for that to happen.
Only reason I can see to worry is if they aren't covered calls.
Am I missing something?

Speaking of missing something...
After doing mostly nothing for years other than watch my balance move up and down, it seems like generating a stream of cash to live off of would be useful.
I have a tax deferred account. Other than kicking myself if/when TSLA rockets up for some unknown reason, is there a down side to just selling ATM or slightly OTM calls every week and just rebuying shares if assigned? Basically, the wheel without puts.

For example, 182.50s for next week are $8 for a 4% return on premium over 1.5 weeks, which extrapolates to 3x annually if done every two weeks.

If TSLA moves above premium + strike, then my share count goes down, but my dollar value still increases, so (ignoring 100 share rounding) the biweekly return keeps compounding.

Might be missing something, but probably not . 666 cc going ITM is, admittedly a tail risk. Since tail risks have been hurting folks in these parts, its still a risk and something to consider.

I did some far distant calls awhile back for $120 that would mean the account had 3x if they went ITM ($400 strike at the time). Then the share price took off after the split and suddenly the shares were trading at $3k ($600 pre-split; I had sold $400 strike calls), and I didn't feel nearly so sanguine about those cc. That's the downside / risk. If the shares were to run up to $400 this quarter, those $600 strike calls won't be nearly as cheap and also won't be nearly as low risk / not worth thinking about. I totally agree with the premise that these are safe calls (I wish I'd sold some of those).


not-advice
Avoid thinking in terms of annualizing a weekly return. The problem is that success with this is going to include weeks with losses - you'll need weeks with gains to offset the losses. Mostly it can get in the way of clear thinking - I know its something that has burned me, and I believe has burned others.

If you haven't already, read the first page of the thread and watch the options alpha options basics course. If nothing else you'll get a better idea of risks and be better able to identify the negatives to any positives. With call sales the big risk I worry about is losing my shares at a lower price than I want to sell them for. In your example, sell the 182.50s... share price goes to 190 and you take assignment (keeping the premium). Shares keep going to 225 and you decide to buy back, despite the loss, in case the shares keep going. You're right and the shares keep going, never to return -- you lose the growth from 190 to 225.

Worse - you're wrong and the shares drop back to 190. Point is that its not risk free.

And the logic you're using mirrors my own back when I started the thread and started going this myself, for the reasons you cite, so you know that I am also thinking the way you are! In fact it continues to mirror my own.

However - its not risk free. Whenever you think you see risk free return, realize that it isn't. That's a good time to ask questions (as you did) -- somebody here will help you spot the risk. It may be, for you, a trivial risk that you're ready and willing to take. That's not the same as risk free.

And the usual - start with a small position (probably a single call) - and trade that some. There is magic in actual trades vs. thinking about it or paper trades. It sharpens the focus because you've got some skin in the game.

 

[khill]

192 this morning was *the* DCB so no. Lower first.

What are your current thoughts on where the stock is headed this week and next week before earnings?

 

[dl003]

What are your current thoughts on where the stock is headed this week and next week before earnings?

SPY to 392 and TSLA 170 before taking a breather.

 

[mongo]

Might be missing something, but probably not . 666 cc going ITM is, admittedly a tail risk. Since tail risks have been hurting folks in these parts, its still a risk and something to consider.

I did some far distant calls awhile back for $120 that would mean the account had 3x if they went ITM ($400 strike at the time). Then the share price took off after the split and suddenly the shares were trading at $3k ($600 pre-split; I had sold $400 strike calls), and I didn't feel nearly so sanguine about those cc. That's the downside / risk. If the shares were to run up to $400 this quarter, those $600 strike calls won't be nearly as cheap and also won't be nearly as low risk / not worth thinking about. I totally agree with the premise that these are safe calls (I wish I'd sold some of those).


not-advice
Avoid thinking in terms of annualizing a weekly return. The problem is that success with this is going to include weeks with losses - you'll need weeks with gains to offset the losses. Mostly it can get in the way of clear thinking - I know its something that has burned me, and I believe has burned others.

If you haven't already, read the first page of the thread and watch the options alpha options basics course. If nothing else you'll get a better idea of risks and be better able to identify the negatives to any positives. With call sales the big risk I worry about is losing my shares at a lower price than I want to sell them for. In your example, sell the 182.50s... share price goes to 190 and you take assignment (keeping the premium). Shares keep going to 225 and you decide to buy back, despite the loss, in case the shares keep going. You're right and the shares keep going, never to return -- you lose the growth from 190 to 225.

Worse - you're wrong and the shares drop back to 190. Point is that its not risk free.

And the logic you're using mirrors my own back when I started the thread and started going this myself, for the reasons you cite, so you know that I am also thinking the way you are! In fact it continues to mirror my own.

However - its not risk free. Whenever you think you see risk free return, realize that it isn't. That's a good time to ask questions (as you did) -- somebody here will help you spot the risk. It may be, for you, a trivial risk that you're ready and willing to take. That's not the same as risk free.

And the usual - start with a small position (probably a single call) - and trade that some. There is magic in actual trades vs. thinking about it or paper trades. It sharpens the focus because you've got some skin in the game.

Thanks for the thoughts!

Spoiler: traders hate it when they overlook this one key senario

The core of my potential change in thought process is not caring about a theoretical 190 to 225 run up. Yes, that would have me kicking myself, but no money is lot, just less gain. Similarly, if holding shares anyway, price drops hurt the balance whether calls were sold or not.

Sell calls at 2% premium (since 4% is rare, thanks for that reality check @MikeC)

Stock goes down, pocket premium, ahead vs just holding, repeat next 'week' - win
Stock goes up a little, pocket premium, ahead vs holding, repeat next 'week' - win
Stock goes up a lot, pocket premium, then buy shares and repeat, account balance increases by strike vs basis, just not as much as price-basis -win (and self loathing)

Looks great, right? Wrong. The key issue you raise is the one step forward two steps back senario.
Sell call, get assigned, rebuy less shares at higher price, stock retreats, now I have less shares/ less value to apply that 2% to.

 

[khill]

SPY to 392 and TSLA 170 before taking a breather.

Post earnings, assuming the earnings are not great, what are you expecting where the stock will go to?

 

[dl003]

Post earnings, assuming the earnings are not great, what are you expecting where the stock will go to?

TSLA topped out at 212 and the big DCB reached 208. Weak stocks dont do that so earning has to be “decent” and Im not really looking for 160 to be breached in any meaningful way. Thats assuming SPY holds up.

Im a bit different from a few other people in that I dont do a lot of “if …, then …” I think that the chart does tell you definitively where the stock is going to go. If I cant see it, then Im just not good enough. I does have a 2nd scenario which I give a low probability to and requires observing how the stock reacts to 170 over the next 5 days.

 

[khill]

TSLA topped out at 212 and the big DCB reached 208. Weak stocks dont do that so earning has to be “decent” and Im not really looking for 160 to be breached in any meaningful way. Thats assuming SPY holds up.

Im a bit different from a few other people in that I dont do a lot of “if …, then …” I think that the chart does tell you definitively where the stock is going to go. If I cant see it, then Im just not good enough. I does have a 2nd scenario which I give a low probability to and requires observing how the stock reacts to 170 over the next 5 days.

Thank you. A lot of people who do TA are saying there is a gap at 146 that could be filled if the stock goes down from 167. So that’s why I wanted to check your thoughts on this.

 

[Max Plaid]

That was the first thing I thought about. As someone who works on data privacy - I'm quite aghast at the news. I'm sure if we found something similar in the companies I've worked for (including MSFT) anyone who did something like this would be severely reprimanded / fired. When it comes to audio/video there is no anonymizing. So, its all private and should be accessible only to people with special permissions for valid business reasons.

I won't be surprised if EU and even CA regulators are looking into this and will ask Tesla for more info (if they haven't already done) and we may see some kind of investigation formally opened at some point.

Seems pretty obvious to me that Tesla need to anonymise the videos, same way that Google Maps does - licence plates and faces are blurred. This isn't difficult to do and less of a risk compared to Google whose images are in the public space.

So I see an easy response from Tesla and they should implement and announce sooner rather than later. Don't understand why they haven't already.

 

[Max Plaid]

PPI came in stone cold, MoM -0.5% versus +0.1% expected, that's a huge drop, FED needs to cut rates...

 

[SpeedyEddy]

Today, the opposite is happening IMHO First (now, pre-market) down, than UP UP UP, Then third move can be MORE UP 30-120 minutes into
market open or DOWN AGAIN who wants to bet? (I bought a few shares that I sold on Yesterday's close back already premarket).
Logic would be: PPI even lower than CPI, so that is leading to bigger earnings (but labour is less cheap, so cost of goods Sold and indirect costs will rise a bit. I think: Services could be getting a hit, but the rest must do better. I think there is more pricing power than suggested in markets. The only thing is that there could be a hold on buying things other than food and energy. I hear a lot of (US)business people talking about that as in companies lowering investments and getting braced for lower demand.
Anyhow, PPI should ease yesterday's pain instead of worsen it. If not, then we are definitely not at the bottom yet. Reaching the bottom is always leading to bad news going bad for markets and good news being good for markets.
There you have it. Volatility still not over?: day trading can bring profits and premium will be high. So maybe -P AND -C options a bit further OTM and further away in time and then close the profitable one first an sit on the other one until the market has turned enough.
(I might add that earnings (of all companies) will tell the true tale and can lead to big moves)

 

[EVMeister]

Then third move can be MORE UP 30-120 minutes into
market open or DOWN AGAIN who wants to bet?

I bet!

 

[SpeedyEddy]

I guess (and bet on) 191.22 gap-down could be filled today, which could be the end of it. (just into my favourite purple danger-zone, I posted earlier. )

 

[UltradoomY]

Yesterday before close BTO 04/21 $185 C's for $6 each

Sold half just now for $8.75 - other half going to let it run for a bit.

Looking to sell some Puts - I like the $170's will see if I can get $3 each still...
Edit - $3.15 for the $170's just now.

 

[dl003]

Thank you. A lot of people who do TA are saying there is a gap at 146 that could be filled if the stock goes down from 167. So that’s why I wanted to check your thoughts on this.

It can be filled but the probability is low. Normally I'd say that all gaps during wave 1 off the low should be filled. However, one has to keep in mind that the crash was due in no small part to Elon's selling which triggered a lot of margin calls on the way down. One could argue that 102 was the deal of a life time and TSLA should have never traded that low. But I'm mainly speaking from an EWT perspective. When wave B retraces so deeply into the territory of wave A (208 vs 212) and the whole correction takes a sideway form like this, the market is very bullish on TSLA. This is not just FOMO but foundational bullishness I'm seeing.

 

[dl003]

For reference, here are some of the corrections after the first spike off the low we'd seen in the past:

Here's the correction that is playing out right now:

So while short term it may seem like the market doesn't get TSLA, when we zoom out the correction has actually been pretty mild.

Can TSLA disappoint at ER? Sure it can. Is it likely? I don't think so.

 

[SpeedyEddy]

0DTE SPY update (because pressure on Tesla to be expected into day-close)
[SPY 411.88 trading range D & W 410-411 Maxpain even lower. So SPY set to go lower, preferably today AND tomorrow]
[TSLA 185 trading range 180-185 Maxpain 185]
Curious to know if they pick TSLA to push SPY lower, but sure would come in handy for both SPY and TSLA, so likely to happen. Tesla today will then finish a bit below 184, I guess.

 

[SpeedyEddy]

FYI made some unprofitable Stock trades today, hitting a few bottoms and tops the wrong way, that I thought to be following through on a bigger move (like expecting 191 to be hit for instance) On the other hand Closed my -P160April 21 and even my -C NVDA 287.5 MAY5 profitably.

Little losses left, so no big issue. Tomorrow I will only attend in the (US) morning. Expect to be selling Pagain on any dip tomorrow and subsequently buy some shares, possibly after these earnings (pre-opening) creating another shockwave?

Time	Symbol	Company Name	Market Cap	Fiscal Quarter Ending	Consensus EPS* Forecast	# Of Ests	Last Year's Report Date	Last Year's EPS*
pre	UNH	UnitedHealth Group Incorporated	$486,190,320,496	Mar/2023	$6.24	10	4/14/2022	$5.49
pre	JPM	J P Morgan Chase & Co	$376,692,739,142	Mar/2023	$3.41	11	4/13/2022	$2.63
pre	WFC	Wells Fargo & Company	$148,024,072,057	Mar/2023	$1.15	9	4/14/2022	$0.88
pre	BLK	BlackRock, Inc.	$100,052,917,326	Mar/2023	$7.73	6	4/13/2022	$9.52
pre	C	Citigroup Inc.	$91,328,119,219	Mar/2023	$1.66	12	4/14/2022	$2.02
pre	PNC	PNC Financial Service	$47,841,954,432	Mar/2023	$3.60	9	4/14/2022	$3.29

Over the weekend I like to be in for a nice ride into TSLA ER, especially when we get a hit tomorrow, then I will be loaded on stock, no -C left, switched to -P. If Big banks are good, I move this strategy to monday/tuesday when smaller banks are reporting (not so many before opening alas)
BofA will report tuesday before opening. Everybody will especially look out for that one.

 

[EVNow]

Funny thing is - I watch all these TA videos and read what people are thinking .... but apparently the price wants to be around 185. Whatever the news and TA may suggest ...

 

[Max Plaid]

I like to keep things exciting, so I've STO a ratio straddle for next week 10x -p190 @$12.1 + 30x -p190 @$6.1

This week still have 10x -p190 on the go and 20x -c190 -> I'm expecting and want the p-190's to assign (net cost $181), that leaves just 20x -cc at risk for next week and a >160<205 range for profits... I'm expecting it to still trade in the 180 - 195 range for net some nice $$$'s, but wouldn't mind another 1000x $TSLA with a net cost of $160 and as always, can roll the calls up and out if necessary, would need a very big move in any case

As we've some new faces around here, just to say I am writing <20% of available calls and all my puts are fully cash-covered, no margin gambling for me!

 

[UltradoomY]

Macro ripping (QQQ 2% and SPY 1.3%) this is feeling to me like tomorrow might be a rally into close separation from Max Pain week.

Has happened a couple of times recently - and with earnings next week I want to play my "gut feeling"

STO - $190P - $4.75 each
BTO - $190C - $0.68 each

Ratio on these of 1 put to 4 calls and pocket the difference for a close tomorrow if needed.

Let's see how this gut feeling works out... or if I need to lose some money...