Wiki Selling TSLA Options - Be the House

[bingoz]

TLSA chewed through the sell wall at 175 in PM this morning. Starting to wonder if the -C187.50, -C190, -C192.50 for next week 5/26 are actually safe.

When TSLA runs no one should stand in front of it regardless of what TA or EW says. I think @dl003 said something to that effect just recently as well when the Twitter CEO news dropped.

Anyone closing/rolling or just holding through?

Are there more signs needed, like breech of $176, $180, $185? But by then the position may be too red to make the roll worth it/doable, maybe close now with smaller loss?

TSLA were 176-177 pre-market last Friday. Need to see if it closes above that at least in 1h timeframe first, in the meanwhile it should not lose 169.5 as well for the upside. I'd like to see TSLA close this week in 170-175 range.

EDIT: I am still holding -c172.5 5/19 which I rolled from -c160 a couple weeks ago. I don't have any rolling plan yet, probably just observe and take action by the end of tomorrow.

 

[JustMe]

Jobless claims came in lower than expected this morning, which may put a bit of pressure on growth stocks today. (Good news is bad news -> int rates may stay higher for longer & lower probability of a near term rate cut).

 

[Right_Said_Fred]

Rolled 10 x -p162.5 5/19 to -p165 5/26 for $1.66. At the moment I prefer time in the market over timing the market.

 

[Max Plaid]

BTC 40x -p167.50 @$0.3, net +$4.8 -> seemed sensible to take the 97% profits on those and be ready to resell if we get some dip

Holding 15x -c167.50 still, no rush on those...

 

[EnzoXYZ]

TLSA chewed through the sell wall at 175 in PM this morning. Starting to wonder if the -C187.50, -C190, -C192.50 for next week 5/26 are actually safe.

When TSLA runs no one should stand in front of it regardless of what TA or EW says. I think @dl003 said something to that effect just recently as well when the Twitter CEO news dropped.

Anyone closing/rolling or just holding through?

Are there more signs needed, like breech of $176, $180, $185? But by then the position may be too red to make the roll worth it/doable, maybe close now with smaller loss?

Very much agreed that the Twitter CEO news and amazing annual meeting could cause trouble for us CC sellers. This would be the case usually but Elon hammered in the macro concern AGAIN. I'll still continue to sell CCs as share price increases. I'm in the camp we will trend within our current range and not spike too high or dip low all that much. I did open some 190ccs for next week yesterday afternoon.

 

[dl003]

TLSA chewed through the sell wall at 175 in PM this morning. Starting to wonder if the -C187.50, -C190, -C192.50 for next week 5/26 are actually safe.

When TSLA runs no one should stand in front of it regardless of what TA or EW says. I think @dl003 said something to that effect just recently as well when the Twitter CEO news dropped.

Anyone closing/rolling or just holding through?

Are there more signs needed, like breech of $176, $180, $185? But by then the position may be too red to make the roll worth it/doable, maybe close now with smaller loss?

It's a bit more nuanced than that. TA and, especially more so, EWT give you possibilities and probabilities. However, these possibilities can have an extremely wide range. Take a bell curve for example, most of what we see is the middle 68% which contains the -1/+1 SD plus the outer 29% which contains the -2/+2 SD, yet there are probabilities of -3/+3, -4/+4, so on and so forth... Their probabilities are just so insignificant to be included in the normal course of operation. As option sellers, the closer we stay to the money, the higher the reward but the lower our winning %. To survive in this game, I think one needs to have an acute sense of when they should bet on a reversal to the mean vs when they should bet on the unexpected.

EWT doesn't give you one definitive target but a range of possibilities. It's up to you to choose the one with the most favorable r:r. Said a different way, no matter how crazy a rally is, somewhere in the EWT universe there is a level that can be used to to predict its target; your job is to assign an appropriate probability to such a scenario. It is true that one should never try to stop TSLA when it runs, assuming you can tell when it is really running vs performing a DCB or piggybacking off SPY. What I suggested was this: when new info surfaces and the stock starts acting irrationally, it is better to get out of the way for the time being and observe. TA will still work then, just maybe not the old TA you did before the news broke. Once you have had a sense of what it's doing, you can jump back in.

Today is not one of those days. If not for a broad market rally, TSLA would have been deep red by now.

 

[CHGolferJim]

Will roll 19May$180 CC —> 2Jun$185 if SP hits $178 today or tomorrow; seems to be moving slowly and will probably stop <$180, but roll credit isn’t too bad and has been rising with SP in recent days. Get the feeling that one of these days we will have a spurt that requires a rescue plan, but these near-OTM’s have been paying nicely the last few months (80% of CC income YTD).

Decided to target roll credit rather than SP, and will be away from trading desk the rest of this week, so closed about 11:30 ET at market ($0.33) and sold at btc+$2.00 via GTC for a $2 net roll credit. Now holding 26May$185, 2Jun$185 and 16Jun$180 on 45% of shares (since $50 OTM 30 DTE tranche premium is so pitiful at $0.35). The 16Jun resulted from a Feb roll during spike up, so I’ll rejigger the allocation when those close out.

This technique to lock in a roll credit is a new idea which may be useful to others during “normal” days of +/- $3 SP volatility.

 

[Right_Said_Fred]

I’m assuming that not much will change today and tomorrow, with expiry probably around 175, so I BTC 10 x -p160 5/19 for $0.04 (98% profit) and STO 10 x -p160 6/2 for $1.46. I had to go two weeks out to get any meaningful premium for that strike.

 

[intelligator]

Options magnet based on volume and gamma sat at 170 and 172.5 (closer to) using Wednesday closing options pricing data. Snapshot today it's at 172.5 (closer to) and 175. Outside of the morning dip and rise, SP is trading an average range of .75 or less. For now, I'm holding off closing 5/19 BCS.

EDIT: The market must be waiting for a post like this, LOL.

 

[Jim Holder]

I think I found a plan that works for me as I move forward in learning:

On these kinds of mid-move uncertain weeks to stay conservative, aim for modest but regular gains of $1k-$2k/wk (so, for example, STO 10x -C185 5/26 for $1.35; STO 10x-P160 6/2 for $1.55). These are more consistent, often, and while they generate less money than having taken larger risks, they add up over time and are easier to manage (=less stress).

On the bigger macro moves with more directional probability, size more aggressively and gain more. These happen less often but generate more money, and see it as a nice bonus.

As I improve I can slowly and carefully expand on both.

Quite a humbling learning experience for sure! ;-)

 

[Jim Holder]

It's a bit more nuanced than that. TA and, especially more so, EWT give you possibilities and probabilities. However, these possibilities can have an extremely wide range. Take a bell curve for example, most of what we see is the middle 68% which contains the -1/+1 SD plus the outer 29% which contains the -2/+2 SD, yet there are probabilities of -3/+3, -4/+4, so on and so forth... Their probabilities are just so insignificant to be included in the normal course of operation. As option sellers, the closer we stay to the money, the higher the reward but the lower our winning %. To survive in this game, I think one needs to have an acute sense of when they should bet on a reversal to the mean vs when they should bet on the unexpected.

EWT doesn't give you one definitive target but a range of possibilities. It's up to you to choose the one with the most favorable r:r. Said a different way, no matter how crazy a rally is, somewhere in the EWT universe there is a level that can be used to to predict its target; your job is to assign an appropriate probability to such a scenario. It is true that one should never try to stop TSLA when it runs, assuming you can tell when it is really running vs performing a DCB or piggybacking off SPY. What I suggested was this: when new info surfaces and the stock starts acting irrationally, it is better to get out of the way for the time being and observe. TA will still work then, just maybe not the old TA you did before the news broke. Once you have had a sense of what it's doing, you can jump back in.

Today is not one of those days. If not for a broad market rally, TSLA would have been deep red by now.

Thanks for the clarification.

Are you no longer concerned of TSLA breaking $180 anytime soon?

Also how deep of a retest do you think TSLA will see?

The overall market (tech stocks, QQQ, SPY) seems nutty toppish here and not sure it’s sustainable for long (I’m not a doomy bear).

 

[dl003]

Thanks for the clarification.

Are you no longer concerned of TSLA breaking $180 anytime soon?

Also how deep of a retest do you think TSLA will see?

The overall market (tech stocks, QQQ, SPY) seems nutty toppish here and not sure it’s sustainable for long (I’m not a doomy bear).

TSLA can break 180 any day now, but there is a mean reversal force at play. The stock tends to pull back from highs and bounce from lows to consolidate just before a big announcement. 6/30 is the date. An ITM call is not a death sentence. You don't have to let them call away your shares. You can roll them out, betting on a reversal to the mean if you think that's a reasonable expectation. That's your exit strategy.

The stock may break 180 in the next 6 days for a plethora of reasons. Maybe China sales number this week is going to be great. Maybe market rallies a lot more from here. Maybe maybe maybe. But for the stock to close 6/30 above 210, there must be some sort of significant development that compels market participants to allow TSLA to break out and hold above the breakout point right before a significant release which may turn out to be a dud. I'm a lot more confident this will not happen than I am about whether 180 will be broken next week. And -185C next week can be rolled to 210 for 6/30.

So really, for me, the question has never been "will TSLA break x by date y?" but rather "if TSLA breaks x by date y, will it ever revisit x again in the future and if so, how long is that going to take?"

If you don't accept the possibility of your calls going ITM every once in a while, that means you can never be wrong in picking a strike and we all know that's impossible. All you can do is pick a good r:r play and have a solid exit strategy which may require a reasonable cost in term of money and time. That lowers my stress level. Life is unpredictable.

 

[Jim Holder]

TSLA can break 180 any day now, but there is a mean reversal force at play. The stock tends to pull back from highs and bounce from lows to consolidate just before a big announcement. 6/30 is the date. An ITM call is not a death sentence. You don't have to let them call away your shares. You can roll them out, betting on a reversal to the mean if you think that's a reasonable expectation. That's your exit strategy.

The stock may break 180 in the next 6 days for a plethora of reasons. Maybe China sales number this week is going to be great. Maybe market rallies a lot more from here. Maybe maybe maybe. But for the stock to close 6/30 above 210, there must be some sort of significant development that compels market participants to allow TSLA to break out and hold above the breakout point right before a significant release which may turn out to be a dud. I'm a lot more confident this will not happen than I am about whether 180 will be broken next week. And -185C next week can be rolled to 210 for 6/30.

So really, for me, the question has never been "will TSLA break x by date y?" but rather "if TSLA breaks x by date y, will it ever revisit x again in the future and if so, how long is that going to take?"

If you don't accept the possibility of your calls going ITM every once in a while, that means you can never be wrong in picking a strike and we all know that's impossible. All you can do is pick a good r:r play and have a solid exit strategy which may require a reasonable cost in term of money and time. That lowers my stress level. Life is unpredictable.

Thank you.

And thank you for having the patience to keep answering my questions!

 

[EVNow]

Thank you.

And thank you for having the patience to keep answering my questions!

Here is a rule of thumb. Look at the Delta. That is the probability the option will be ITM at expiry. Lot of option sellers target a particular delta to sell. That along with support/resistance levels can give you a good idea about what is comfortable for your risk profile.

For eg. 5/26 C185 has a delta now of 0.19, so about 20% probability of ITM. 6/2 160p is about 16%.

 

[Jim Holder]

Here is a rule of thumb. Look at the Delta. That is the probability the option will be ITM at expiry. Lot of option sellers target a particular delta to sell. That along with support/resistance levels can give you a good idea about what is comfortable for your risk profile.

For eg. 5/26 C185 has a delta now of 0.19, so about 20% probability of ITM. 6/2 160p is about 16%.

Thanks. I have used delta as a guide in the past but have also seen delta completely be disregarded on a pump, almost like the system said, "ooops...my bad, now it's 90% probability ITM..." I guess that's where S/R comes into play. Taken together is definitely a good balance.

 

[EVNow]

Thanks. I have used delta as a guide in the past but have also seen delta completely be disregarded on a pump, almost like the system said, "ooops...my bad, now it's 90% probability ITM..." I guess that's where S/R comes into play. Taken together is definitely a good balance.

That is actually the wrong way to look at probability. That 20% probability is because of such "pumps". So, out of ten weeks, you can expect 2 of them will end with the 185 call ITM.

Ofcourse, if the SP raises quickly, IV raises and delta will be higher.

 

[Jim Holder]

@dl003 I found this from a post of yours a while back. It's relevant now as it was then:

Personally every day I try to answer these questions:
1) What are the important supports/resistance levels?

2) What is the large/medium/small degree wave count? Are we more likely to go up/down/sideway this day/week/month?

3) Is there a bullish/bearish divergence signal on the appropriate timeframe? If we drop 10% from high, I’m not going to look at anything lower than 1H for signs of reversal.

4) How is the market going to try and trap me today?

• If the trend is up LT and MT=I'm going to sell ATM puts aggressively

• If it is up LT but down MT=I'm going to try to find a ST bottom to sell OTM puts

• If it is down LT=I will not sell any puts

Bottoms can be called based on S/R, wave count and divergences.

Macro event timing is also a powerful tool. I don't know how CPI and FOMC is going to go, but I know the week before will be a "reversal to the mean" week. People will settle big bets before the week is over which means there's a limit to how low/high the SP can go.

 

[dl003]

Although we wear 2 hats, always remember what we really are. When push comes to shove, we are first and foremost TSLA hodlers. Our entire trading strategy, no matter what it is for each individual, has been founded on this: Tesla the company will be great, therefore we should feel comfortable holding shares, regardless of how long it takes, and sell calls on those shares to generate some income while we wait. It is super important to remember this because you need to have a bottom line. If TSLA goes crazy up, what are you going to do? Are you going to let the TSLA trader lose their mind and get whiplashed or are you going to let the TSLA hodler take charge and say "I shouldn't have sold those calls. Now that I'm wrong, let me roll those out as far as I reasonably can, while I'm still having all my marbles. Worst case scenario I'll just have to wait a while without any income." Accept this worst case scenario and accept that it is part of being a TSLA hodler. You have to do it early. When it comes to trading, our greatest asset is not the number of shares or the amount of cash we have. It is our mind. So accept that there will come a time when you will get it totally wrong, up or down it doesn't matter. When that happens, are you going to be willing to do the hard but logical thing? If you roll those calls out, that may turn out to be completely unnecessary as the stock may reverse the next day, but such is the nature of risk management. Do whatever it takes to keep your mind 100% functional at all times. Be smart or be fast.

In order to have the means to make these hard decisions, stay away from margins. Margin is a wonderful tool you can use to fix your problems every now and then, but not if you've already maxed it out even before sugar hit the fan.

 

[Jim Holder]

Although we wear 2 hats, always remember what we really are. When push comes to shove, we are first and foremost TSLA hodlers. Our entire trading strategy, no matter what it is for each individual, has been this: Tesla the company will be great, therefore we should feel comfortable holding shares, regardless of how long it takes, and sell calls on those shares to generate some income while we wait. It is super important to remember this because you need to have a bottom line. If TSLA goes crazy up, what are you going to do? Are you going to let the TSLA trader lose their mind and get whiplashed or are you going to let the TSLA hodler take charge and say "I shouldn't have sold those calls. Now that I'm wrong, let me roll those out as far as I reasonably can, while I'm still having all my marbles. Worst case scenario I'll just have to wait a while without any income." Accept this worst case scenario and accept that it is part of being a TSLA hodler. When it comes to trading, our greatest asset is not the number of shares or the amount of cash we have. It is our mind. So accept that there will come a time when you will get it totally wrong, up or down it doesn't matter. When that happen, are you going to be willing to do the hard but logical thing? If you roll those calls out, that may turn out to be completely unnecessary as the stock may reverse the next day, but such is the nature of risk management. Do whatever it takes to keep your mind 100% functional at all times.

Truth. For me, in my simple understanding, I like to trade on the trends, which means to stay in as the SP rises and liquidate to cash once the stock enters a consolidation/congestion zone and then starts losing momentum, falling back through support, confirming a top and reversal down is in play. (I can always hop back in if it was a false breakdown.)

This isn’t trying to time the market, this is entering and exiting based on the charts and patterns that are actually happening.

My original problem started of not using stops at $1,000 pre-split (total noob and didn’t know about using them properly) and I got stuck too deep holding as the SP fell and fell.

The lot at $243 was a CSP that went ITM during the December drop

At $210 I deliberately didn’t set a stop so I can have shares to sell calls against closer TTM for better premium.

Practically speaking, this means when TSLA runs next, I don’t plan to sell any shares until it tops out. At that point I’ll see what the SP is and my different CB lots and let go those that have a CB below the SP (made gains).

Say it runs to $242 and tops out and shows breakdown signals, I can sell everything with a CB below $242 for quite nice gains, then sit out with dry powder until the fall completes, whether it’s a $10, $40, or $100 drop.

Once TSLA shows signs of slowing the fall and enters a congestion zone, starting a bottoming out, and then breaks through some resistances with force and momentum, then I can re-buy for the next ride up.

I believe this way captures most value. Case in point 2021-2022, had I known about these rules and followed them I would have quadrupled the qty of shares I’m holding. Sitting through those deep (and shallow) retracements seems wasted opportunity. Remember can always hop back in if breakdown was false.


Meantime while waiting the trends out, to sell covered calls and puts for income and for “suffrage.”


LONG SHARES RULE

• A downtrend is signaled when the stock closes below support for 2-days + loses Stochastic over 60. This is time to sell and go to cash and wait for bottoming before re-entering.

• Rebuy once stock finds its bottom and it breaks out over the resistance channel + Stochastic over 60 on the 1hr chart. Bonus confirmation is RSI over 50 + DMI green over red + MACD both lines facing up. While in a strong uptrend channel don't rely on Stoch +60 too much. Wait for 1-2 day candles break out of trend to confirm move.

 

[MikeC]

Not too happy about my 10x 5/26 -c175 and 8x 5/26 -c177.5 right now. The 175s could only be moved up to 177.5 the following week which didn’t feel worth it. I did sell 2x 5/26 -p175 to straddle the -c175.

I had been planning to double the contracts if necessary but things are starting to feel bullish again and I wouldn’t be surprised if we continue going up a bit longer.