Wiki Selling TSLA Options - Be the House

[dl003]

I see us as the emo middle child of this forum.

 

[buttershrimp]

I think of it as Analytical Gambling..

That’s true, you’re buying calls… analytical horserace gambling.

 

[UltradoomY]

That’s true, your buying calls… analytical horserace gambling.

Up about 22% ish... right now on them - at 30% I will sell some and roll the others. There aren't any attractive weeklies available after that for me, maybe the Jun 18th but I need to look at it more.

 

[jeewee3000]

Similar to @Lycanthrope I'm in a position where I need cash for house renovations around 4-6 months from now.

Selling short term CC's nets me some profits but risks me netting a selling price well below ATH. I just checked out the premiums for july / september 2021 900calls, and those are quite large. And we're not even at a local high or at high IV.

Therefore I will investigate if I can sell some CC's after the next runup with an expiration of for example sep 21 and a strike price of (at least) 900$. This way it seems to me:
- I'll have a guaranteed extra 30% return on my investment/shares (680 -> 900);
- I won't have to stare at the ticker every day: I'll have picked a strike price I'm truly comfortable with;
- to gain substantial premiums I don't have to sell calls against many shares, just a few CC's should be plenty for my cash purposes.

There are two downsides I can think of:
1) in case the SP surges waaaaay past the strike price I've picked, I've lost out on gains;
2) theta decay is much slower these first few months, and will only start to pick up a month from expiration. Therefore the CC won't really drop much in the short term. Therefore the odds I can close it soon with substantial profit (+50%) and resell another call is low.

Has anyone used the same strategy? Any thoughts on this? I.e.: am I missing something obvious?

 

[UltradoomY]

Similar to @Lycanthrope I'm in a position where I need cash for house renovations around 4-6 months from now.

Selling short term CC's nets me some profits but risks me netting a selling price well below ATH. I just checked out the premiums for july / september 2021 900calls, and those are quite large. And we're not even at a local high or at high IV.

Therefore I will investigate if I can sell some CC's after the next runup with an expiration of for example sep 21 and a strike price of (at least) 900$. This way it seems to me:
- I'll have a guaranteed extra 30% return on my investment/shares (680 -> 900);
- I won't have to stare at the ticker every day: I'll have picked a strike price I'm truly comfortable with;
- to gain substantial premiums I don't have to sell calls against many shares, just a few CC's should be plenty for my cash purposes.

There are two downsides I can think of:
1) in case the SP surges waaaaay past the strike price I've picked, I've lost out on gains;
2) theta decay is much slower these first few months, and will only start to pick up a month from expiration. Therefore the CC won't really drop much in the short term. Therefore the odds I can close it soon with substantial profit (+50%) and resell another call is low.

Has anyone used the same strategy? Any thoughts on this? I.e.: am I missing something obvious?

Did you mean the 2022 September or July calls?
Lots of catalysts between now and July of next year that can make things rocket.
If you need the cash now (I'm building a house now too....) I would look at something that expires before EOY
The December 17th 900 strikes are at $60 a contract now, and while that isn't as high as the 2022's it does give you options to roll or buy back on a dip.

 

[buttershrimp]

And the Lord did say “Raise ye from your MMD and selleth calls with good premiums, verily I say unto you…”

 

[jeewee3000]

Did you mean the 2022 September or July calls?
Lots of catalysts between now and July of next year that can make things rocket.
If you need the cash now (I'm building a house now too....) I would look at something that expires before EOY
The December 17th 900 strikes are at $60 a contract now, and while that isn't as high as the 2022's it does give you options to roll or buy back on a dip.

I meant Sep 2021. I have cash on hand, just need around 30 to 70k extra.

EDIT: @UltradoomY : good point on buying back on a dip. Therefore I'll wait until we do see some local high before selling EOY CC's in order to increase my odds of being able to buy them back on a dip.

 

[Tslynk67]

Similar to @Lycanthrope I'm in a position where I need cash for house renovations around 4-6 months from now.

Selling short term CC's nets me some profits but risks me netting a selling price well below ATH. I just checked out the premiums for july / september 2021 900calls, and those are quite large. And we're not even at a local high or at high IV.

Therefore I will investigate if I can sell some CC's after the next runup with an expiration of for example sep 21 and a strike price of (at least) 900$. This way it seems to me:
- I'll have a guaranteed extra 30% return on my investment/shares (680 -> 900);
- I won't have to stare at the ticker every day: I'll have picked a strike price I'm truly comfortable with;
- to gain substantial premiums I don't have to sell calls against many shares, just a few CC's should be plenty for my cash purposes.

There are two downsides I can think of:
1) in case the SP surges waaaaay past the strike price I've picked, I've lost out on gains;
2) theta decay is much slower these first few months, and will only start to pick up a month from expiration. Therefore the CC won't really drop much in the short term. Therefore the odds I can close it soon with substantial profit (+50%) and resell another call is low.

Has anyone used the same strategy? Any thoughts on this? I.e.: am I missing something obvious?

I did this last December. The day before S&P inclusion I sold 17x March cc780's @$60 - I figured we'd had the run-up and netted a nice $100k from the trade, so then imagine my surprise when it ran up to $900 in January

So I spent most of January and half of February totally convinced these shares would be called away, but then the big drop and they ended up comfortably OTM. The while experience was quite cathartic and it put me in a position where I was no longer afraid to sell my shares, which has now allowed me to act more aggressively with my strikes and earn more permiums

And let's face it, $4500 pre-split, that's not too bad is it - plus you can always roll them forwards a bit, you'll get more premium and at some point there'll be a dip

 

[ReddyLeaf]

Well, finally jumped in at the 11:35 peak. STO 3x -c702.50 @4.65 at ~0.20 delta. This is a bit bold for me here. I only had $150 free cash in this account for a buyback, so I really need this to finish OTM. There’s still a small amount of money left in some mutual funds, just to keep them open on the account, but I don’t really want to sell all of those. Anyway, my thinking here is that there are some whale MMs fighting it out for 680-700 this week and they will protect me.

 

[ReddyLeaf]

Max pain has dropped to $695, but $702.50s would probably keep me up at night. I sold some 705s, and that's given me some heartburn already.

Yes, definitely bold for me, but this is only three contracts, and it’s in my ROTH IRA, so if I can’t buyback and they are called away, I’ll definitely sell aggressive puts to get them back. There’s also an extra 55 shares in the account that could be sold to raise cash for the buyback, but I’d rather not. My goal is to just keep adding a couple of shares each week from the premiums. I won’t be accessing this account for a long time.

 

[adiggs]

Sigh - I've done it again and sold calls in the wrong account. And for the 3rd time (in a year) I figured it out pretty much immediately and was able to close the position (thankfully). The two previous times I even made $100 along the way - this time I earned a total of $1.25 (that's not a premium) on 2 contracts. At least I continue to earn a little or a lot when making this mistake - I just know it's going to come around and bite me at some point.

Let this be a reminder - be sure your transactions are happening in the right account.

 

[ReddyLeaf]

Ok wheelers, what’s your plan if Tesla announces a surprise stock split? How are you positioning for such a possibility? I know there’s been plenty of discussion on the main investor thread about the possibility and limitations on the total shares authorized, so likely they will need to authorize more shares. So, the last split resulted in a $100 jump in five days, about $275->$375. Edit: $200 total rise in 3wk. Would we see a similar or proportional SP rise?

Selling weekly CCs with little free cash for buybacks, would mean being unable to buyback to roll forward, thereby losing my shares. I really need to work on a mitigation strategy. I’ve got one LEAP and have been dabbling in selling a few cash secured puts. Maybe I should try to buy a few more LEAPS instead of shares with my weekly premiums. Other ideas?

 

[bkp_duke]

Ok wheelers, what’s your plan if Tesla announces a surprise stock split? How are you positioning for such a possibility? I know there’s been plenty of discussion on the main investor thread about the possibility and limitations on the total shares authorized, so likely they will need to authorize more shares. So, the last split resulted in a $100 jump in five days, about $275->$375. Would we see a similar or proportional SP rise?

Selling weekly CCs with little free cash for buybacks, would mean being unable to buyback to roll forward, thereby losing my shares. I really need to work on a mitigation strategy. I’ve got one LEAP and have been dabbling in selling a few cash secured puts. Maybe I should try to buy a few more LEAPS instead of shares with my weekly premiums. Other ideas?

Roll up is the only plan I would have, and it might take me months to do that if the upsurge was huge. It's why I'm following @Lycanthrope and selling weekly CC's, usually on a Tuesday, and closing them on Friday. That cuts about 1/2 of a calendar week out of things, hopefully minimizing as much as possible.

I don't see a stock split as likely anytime soon. Tesla at best could do a 1:1.9 split, and that would exhaust all the shares allowed by their bylaws. Plus, that would leave them with zero room for employees exercising options, etc. So if this is likely to happen, I would suspect we might see it buried somewhere in a shareholder vote to increase the total allowed shares. I would take that as a red flag, personally, and close out all my positions and wait for a while to see what happens.

My "not advice", just what I'm considering.

My other "not advice" is if you are going to be rolling with little free cash, find a brokerage that doesn't require you to keep cash on hand, but will apply the BTO process to the STC leg of the trade. Otherwise, I think you are adding additional risk.

 

[buttershrimp]

Sigh - I've done it again and sold calls in the wrong account. And for the 3rd time (in a year) I figured it out pretty much immediately and was able to close the position (thankfully). The two previous times I even made $100 along the way - this time I earned a total of $1.25 (that's not a premium) on 2 contracts. At least I continue to earn a little or a lot when making this mistake - I just know it's going to come around and bite me at some point.

Let this be a reminder - be sure your transactions are happening in the right account.

so you're saying you made a profit!

 

[buttershrimp]

Ok wheelers, what’s your plan if Tesla announces a surprise stock split? How are you positioning for such a possibility? I know there’s been plenty of discussion on the main investor thread about the possibility and limitations on the total shares authorized, so likely they will need to authorize more shares. So, the last split resulted in a $100 jump in five days, about $275->$375. Edit: $200 total rise in 3wk. Would we see a similar or proportional SP rise?

Selling weekly CCs with little free cash for buybacks, would mean being unable to buyback to roll forward, thereby losing my shares. I really need to work on a mitigation strategy. I’ve got one LEAP and have been dabbling in selling a few cash secured puts. Maybe I should try to buy a few more LEAPS instead of shares with my weekly premiums. Other ideas?

Anyone got a good rule of thumb/tricks for having enough cash to buy to close positions to roll for those of us that fly too close to the sun? Realizing by upping my share count to round 100, I've depleted cash reserve

 

[adiggs]

Anyone got a good rule of thumb/tricks for having enough cash to buy to close positions to roll for those of us that fly too close to the sun? Realizing by upping my share count to round 100, I've depleted cash reserve

My old pattern was to not spend any of the cash from open positions until after they were closed. That wasn't enough either for seriously losing positions.

Since I roll losing positions now for positive cash flow I don't really worry about it. But I'm also ready and willing to roll those deep ITM positions for months - I'm still able to make my cash flow targets as one leg being deep ITM means the other is performing well (at least as long as the first leg to go deep ITM is 'chasing' the share price reasonably well).

 

[adiggs]

lets face it, fundamentals don't see to move it much!

Way too soon to say that we're in a new trading range, but this is starting to look like that 5 year trading window where we got steadily better news and steadily improving financials with no movement in the share price.

After the huge run last year, a full year for digesting and establishing a new trading floor doesn't sound unreasonable to me at all. Then some help from the MM short sellers (share manufacturers), another year or two of holding the share price down, we could be in this vicinity for a long time to come.

Especially if Tesla if effective at deploying any profits into new infrastructure, that in turns yields higher volumes and revenue, to in turn be deployed into new infrastructure, etc.. This will keep the financial metrics based investors off balance and thinking that the company is struggling, when it is actually thriving.

 

[Criscmt]

Way too soon to say that we're in a new trading range, but this is starting to look like that 5 year trading window where we got steadily better news and steadily improving financials with no movement in the share price.

After the huge run last year, a full year for digesting and establishing a new trading floor doesn't sound unreasonable to me at all. Then some help from the MM short sellers (share manufacturers), another year or two of holding the share price down, we could be in this vicinity for a long time to come.

Especially if Tesla if effective at deploying any profits into new infrastructure, that in turns yields higher volumes and revenue, to in turn be deployed into new infrastructure, etc.. This will keep the financial metrics based investors off balance and thinking that the company is struggling, when it is actually thriving.

Do you expect the finances to be such that the p/e will remain about the same? My guess is, it’s very unlikely.
That alone should keep moving the share price up gradually.
If we have EPS of $.80 in Q2, the p/e will fall significantly, and think about the forward p/e.

 

[Criscmt]

Something I've been thinking about, and even talking about with somebody locally that I yack about this stuff with, is the split I now have in my thinking about TSLA.

The long term investor in me hasn't changed in my thinking at all. I still expect a $4k-$10k share price by 2030. Most importantly I continue to track information I consider relevant to that 10+ year investment thesis and whether or not that thesis is weakening or even broken down.

The other part of me that is a pretty new part of me (April of last year; it's my anniversary!) cares about sub-3 month movements and factors influencing the share price. And mostly more like weekly or a month range of impact.


I say all of that to say this. We've had a lot of bad news drip drip dripping out about Tesla for the last month or so. Today's news (that I saw) was Stellantis talking to Tesla about how to back out of the pooling arrangement they have as they don't need it any longer (my immediate reaction - I think they are premature, but they also have plenty of spreadsheet jockeys for whom this analysis is totally in their wheelhouse and I'm not there - I take their word for it); labor probe in Germany about the GF site; 6 month delay in first production in Germany. I'm sure that with little effort we can come up with many more the last week or three.

What does this mean though?
The long term part of me that has been following along for nearly 10 years says "it means nothing". I've seen all of this and worse the last 10 years, both concentrated and spread out, and its all just noise. The earlier days when each and every fire event with a Tesla would dominate the news cycle for weeks - even when it was a situation where everybody in the car should have been dead, but instead they walked away and got to watch their Model S burn (slowly).

Anyway - even the 6 month delay in first units won't make a bit of difference in 5 years, and probably more like 2 or 3. The factory will be at full production by then and nobody will be talking about how we could have had 6 incremental months of full production at that point.

The short term part of me though - I'm trying to weigh out whether this short term news is particularly bad (impact) and whether there is a particularly large amount of it (volume). And on this point, my read is that the short term negativity is higher volume than normal and some of it has more impact than normal (most of it is noise, even in the short term).

AND whether it matters to me or not, my belief system doesn't matter to the share price. It's the belief of the overall investor community, complete with the ability of the shorts to manipulate that belief via news and share price, that matters.

So while I do think a bit of a bounce is called for tomorrow, my slightly wider point of view (which is not technically driven) is more bearish. I don't have a target or timeframe for this view - on that I think there is more of a bias downwards from here than upwards. For those that see a spring being wound tighter and tighter - you could easily be right. I'm more in the camp that last year's run has priced in all of this year's good news and potential good news, and then more.


These are my opinions and they do influence my own decisions, and thus the consequences I experience. Not advice. I r not financial advisor.

I added this aspect of p/e influencing SP upwards on a different reply.
Thought adding the point of p/e to this message also is relevant.

Re-stating, for the SP to continue sideways for a few years like in the past, the finances of the company must keep the p/e pretty much at current levels (~672 as of this writing) or within 60% of this level (say ~400) if the multiples across the growth stocks are cut down due to market conditions. Isn't that very unlikely?

 

[buttershrimp]

Anyone know if Schwab has the ability to set a sell limit order for premium above the current bid/ask price? I don't know if it is because I put it in the last 30 minutes but it wouldn't let me, saying I'm not approved for that level! Is this a level 2 option thing?.... On Robinhood, I had no problem. WTF? I'm finding Schwab to be very clumsy and designed by boomers.