Wiki Selling TSLA Options - Be the House

[SebastienBonny]

What is common practice for those holding 5/26 -C185 when TSLA touches $185 during the week (likely this week we are at $183 already), roll then or wait to end of week to roll? Is there an interplay with when to roll?

Thanks.

This is, of course, my own opinion, but I would've rolled those already for shares I don't want to lose (when we've hit 180).
If not the case, I would sit it out a bit and let some value out first, unless we see 190 or higher, then I would roll next week, same strike or a bit higher, to gather some premium (milking the contract, like they say ).

Holding 190CC for 6/30, so my rule is to roll this to 7/21 200 CC (for some premium) if we hit 185.
You can always roll it back in (lower) if we get a pullback or close the contract of course.

 

[CHGolferJim]

What is common practice for those holding 5/26 -C185 when TSLA touches $185 during the week (likely this week we are at $183 already), roll then or wait to end of week to roll? Is there an interplay with when to roll?

Thanks.

AFAIK, in most cases you get a better roll credit if you roll before SP breaches the strike price. The BTC cost of 26May$185 CC is likely to rise during the week if we approach SP, and of course it’s an early bet on where the SP will end up. Somewhat unusually last week as SP approached $180, but slowly, the 19May$180 increased in value slower than the roll target, so the potential credit rose. I rolled on Thu since I wouldn’t be at the trading desk for the remainder of the week, and got $2 vs. the $2.60 difference at Fri close. I think I’ll wait until Wed to make a decision on my 26May$185 CC unless SP moves quickly to ~$187 with apparently little likelihood of dropping back. At these low levels of premium, I try to get at least 80% profit before closing if the roll candidate is attractive with several DTE better than waiting for expiration and Mon to resell. The higher the likelihood of SP>strike, I’ll accept earlier rolls with lower credits in order to avoid a late week SP surge where rolls result in debits.

 

[UltradoomY]

Messed around a bunch on Friday - BTO some $185 C's for pennies, sold for triple - BTO some $175 P's for pennies when Powell started talking and sold for a loss.
In total I think it was a $400 positive day for messing around - deleted my post about since I didn't want to spam the board with nonsense.

Friday afternoon, looking at the channel and thinking it through - I decided to try out a Calendar Call strategy - I opened a -
STO - 05/26 $180C (multiple) for $4.32 each
BTO- 06/02 $180C (same multiple) for $5 each (differing times)

Wanted to see how the relationship plays out between the expirations - worst case I manually close on Friday and pocket the difference.
Might experiment with rolling this weeks contract out and up to next week and making it a spread with some of the contracts.

not sure how to play it yet, just really wanted to open it and see how I "felt" about the dynamics of a calendar

Cheers

 

[juanmedina]

I rolled my $185 to $187.5 on Friday by giving up half of my initial credit. I am going to try to wait and see until Friday but the stock is ripping.

 

[Jim Holder]

MM price distribution changed due to option flow, less bullish (compare to yesterday's post) but still bullish. Shows how it evolves and need to check at least once a day:

Today:

Tuesday:

Wednesday:

Thursday:

Friday:

 

[MikeC]

What is common practice for those holding 5/26 -C185 when TSLA touches $185 during the week (likely this week we are at $183 already), roll then or wait to end of week to roll? Is there an interplay with when to roll?

Thanks.

I hate rolling on Mondays because there’s a lot of time value left so you can’t usually roll the strike up more than 2.50 or so. And a lot of time the SP reverses over the course of the week, anyway.

That being said, if you definitely don’t want to lose the shares, you kinda have to roll. Or you could consider switching half to -p185 to cut your exposure in half, by adding downside risk instead.

 

[ReddyLeaf]

This is the best, most understandable advice I’ve read in a long time. Thank you so much! I’m guessing that lots of folks will benefit from this, and maybe no CC sold below 190 this week! Edit: if I’m reading the channels correctly, then ICs at 160/170/200/210 should be safe for 5/26. They were close to $0.80-$0.85 yesterday, so very nice return on capital at risk. Might try something like that.

The call side is definitely safe. Not so sure about the put side, though, as the bottom of a bullish channel is naturally a stronger magnet than the top.

Decided to go with -c205s/+c215s and -c200s (CCs) near this morning’s $185 SP. Only did half my shares and still have plenty of cash for more ICs later in the week. worried by that large OI at 200, seems like someone knows something that I don’t. Using your advice that these should be rollable if we jump another $10-$15 this week (out of the channel). Thanks.

 

[Jim Holder]

Decided to go with -c205s/+c215s and -c200s (CCs) near this morning’s $185 SP.

Which DTE?

 

[Jim Holder]

I hate rolling on Mondays because there’s a lot of time value left so you can’t usually roll the strike up more than 2.50 or so. And a lot of time the SP reverses over the course of the week, anyway.

That being said, if you definitely don’t want to lose the shares, you kinda have to roll. Or you could consider switching half to -p185 to cut your exposure in half, by adding downside risk instead.

I rolled my 15x -C185 52/26 to -C195 6/2 for a debit. Even that strike/DTE doesn’t feel safe to me will watch how the week plays out.

I for sure don’t have the iron stomach some of you have!

I can’t wait for TSLA to be over $200 so I could start selling covered calls on strikes I want the shares taken without worrying all week.

I realize now too that this likely meant the PREVIOUS Friday not the expiring Friday (a bit confusing):
"[Dl003]: If by EOD Friday it reaches and closes at 187.5, you can roll a 5/26 -182.5C to a 6/2 -187.5C for $0 or a small debit. This is how you can play catch up with a bullish channel."

 

[ReddyLeaf]

Which DTE?

5/26, so 4DTE, more than I like with ICs, but I already had the BPS side from last week, so adding the BCS at a higher SP gives more premium. Besides, wanted to get those CCs sold this AM for the extra IV bounce.

Extra edit: big fight for $185 today, three tests, maybe looks like this one is falling. I had two June +c175s/-c180s that I bought two weeks ago as an experiment and decided to close those out as well this AM. Not huge money, but enough for a couple nice dinners.

Edit 3: big break above 185.50, just as I was writing. Up $20 in six days! Blowoff?

 

[JustMe]

ARKK (+4%) and RIVN (+5%) are also up big this morning. Looks like risk on speculation to me. I wouldn’t be surprised to see a reversal today.

 

[JustMe]

either way it feels dangerous to bet big rn

 

[MikeC]

I rolled my 15x -C185 52/26 to -C190 6/2 for a $450 debit. Even that strike/DTE doesn’t feel safe to me will watch how the week plays out.

I for sure don’t have the iron stomach some of you have!

I can’t wait for TSLA to be over $200 so I could start selling covered calls on strikes I want the shares taken without worrying all week.

I realize now too that this likely meant the PREVIOUS Friday not the expiring Friday (a bit confusing):
"[Dl003]: If by EOD Friday it reaches and closes at 187.5, you can roll a 5/26 -182.5C to a 6/2 -187.5C for $0 or a small debit. This is how you can play catch up with a bullish channel."

I think he meant if you're $5 OTM on expiration day, you can roll up $5 to be ATM for the next week for no cost.

The problem is when the strike gets blown by on Monday, who knows where we'll end up Friday? If we're $10-15 OTM on Friday, you'd have to move out at least a few weeks or more to get the strike ATM.

I just flipped a few -c185 to -p185 for balance. Still holding 16x -c182.50 - I'm hoping for a better roll later in the week. I'm okay with them being called away but would like to get the strike as high as possible.

 

[Jim Holder]

I think he meant if you're $5 OTM on expiration day, you can roll up $5 to be ATM for the next week for no cost.

The problem is when the strike gets blown by on Monday, who knows where we'll end up Friday? If we're $10-15 OTM on Friday, you'd have to move out at least a few weeks or more to get the strike ATM.

This is probably why they say rolling works best on gradual measured increases (i.e. +$5/week) but can quickly get out of hand if the SP puts up $10-$15 dollar candles, it can run right over the strike and one can end up making quite a mess trying to get sold calls out of the way.

 

[adiggs]

I rolled my 15x -C185 52/26 to -C195 6/2 for a debit. Even that strike/DTE doesn’t feel safe to me will watch how the week plays out.

I for sure don’t have the iron stomach some of you have!

I can’t wait for TSLA to be over $200 so I could start selling covered calls on strikes I want the shares taken without worrying all week.

I realize now too that this likely meant the PREVIOUS Friday not the expiring Friday (a bit confusing):
"[Dl003]: If by EOD Friday it reaches and closes at 187.5, you can roll a 5/26 -182.5C to a 6/2 -187.5C for $0 or a small debit. This is how you can play catch up with a bullish channel."

Something to realize about the roll as well - its not pure sunshine.

By that I mean that as with everything, you've gained something you want in exchange for something you don't want. In this case, if the shares were to drop back below 185 by Friday, then the current position would have expired worthless or as much of a gain as you wanted to hold out for. With the roll, now you have a position that is open longer at a better strike. This week might finish below 185, and then be on track to be over 195 on 6/2.

Of course - if you did take assignment on those 6/2 cc's you would be getting an extra $10/share on the sale of those shares over selling this week and that is a great outcome (whether the actual sale itself is a great outcome or not - 195 in a couple of weeks sounds a lot better than 185 this week).

There's a timing thing here that can work against you. Of course we roll because we expect it to work for us; only pointing out that its not trivial.

 

[Jim Holder]

Something to realize about the roll as well - its not pure sunshine.

By that I mean that as with everything, you've gained something you want in exchange for something you don't want. In this case, if the shares were to drop back below 185 by Friday, then the current position would have expired worthless or as much of a gain as you wanted to hold out for. With the roll, now you have a position that is open longer at a better strike. This week might finish below 185, and then be on track to be over 195 on 6/2.

Of course - if you did take assignment on those 6/2 cc's you would be getting an extra $10/share on the sale of those shares over selling this week and that is a great outcome (whether the actual sale itself is a great outcome or not - 195 in a couple of weeks sounds a lot better than 185 this week).

There's a timing thing here that can work against you. Of course we roll because we expect it to work for us; only pointing out that its not trivial.

Good points. Your comments led me to check what would happen if the -C195 went ITM next Friday, I'd actually be okay if the shares were called away. I have enough at around $198 CB, so even if some or all were called away at $195, after the premium it'd be fine. That's a relief! Though I'll reevaluate next week to see if moving the strike up a bit will be more advantageous if TSLA keeps running so I could capture more gains from the run.

Slowly but surely, it's all clicking. Just takes being inside the vortex for some time to truly learn and figure all this out (and even then there's always more to learn).

 

[EVNow]

Decided to go with -c205s/+c215s and -c200s (CCs) near this morning’s $185 SP.

I sold -202.5/+212.5. It was good I didn't sell on Friday - but looks like SP keeps going up. May be not a bright idea selling calls at all this week.

 

[OptionsGrinder]

The psychology of channels. Let's study the current bullish channel.

Look at where the stock touched the top trendline resistance in the past 2 weeks.

The first time it touched it was a non-event. All channels need a point of origination.
The 2nd time was also a nothingburger except for the fact that it made that new high only after an unexpected news (new TWTR CEO) and after such a steep pullback.
The 3rd time was when SPY hit 6 month high on Friday.

The question is: what did it take for the stock to spike violently twice in 2 weeks? Nothing short of spectacular. These events can happen again and again but just like drugs, euphoria tends to numb the market once it's has worn off and each subsequent dose has to drastically outdo the last in order to produce new highs.

Bullish channels are a luxury. Take this one for example: every week it goes up by about $5. If TSLA simply follows this channel for the next 3 years and gains a measly $5 every week, it would end up at $930 by June 2026. Let's forget about the for/against valuation arguments for a second. What about macro hiccups? Company bad news?

Bullish channels, therefore, have a limited shelf life and the stock tends to gravitate toward the bottom of the channel over time before eventually falling out of it and it takes a tremendous amount of energy to touch the top. Every time it touches the top, ask yourself what happened? Did something fundamentally change, like a massive ER beat, or is it something else? If TSLA rallies to the top all by itself then pls, for the love of God, don't stand in front of it. On the other hand, if it is simply responding to unexpected developments that don't really have a long term impact to the fundamentals, then it's more of a flash than a freight train. This is when one should expect a semi-immediate reversal to the mean.
View attachment 939503
Can TSLA break out of a bullish channel? It sure can, but the market doesn't like it. Every time that happened in the past, the stock would eventually fall back to earth after a spectacular breakout.
View attachment 939517

In both of these 2 examples, TSLA underwent some sort of once-in-a-lifetime event. The first time was the SP 500 inclusion followed by a gamma squeeze into Q4 2020 ER. The 2nd time was a massive Q3 2021 ER beat followed by a massive short squeeze. But, eventually, the stock couldn't survive the high altitude and crashed back to earth weeks/months later.

So:
When TSLA is acting irrationally, especially after a fundamental change, get out of the way. If you're already caught dead with a slightly ITM call, roll it out 6 months or so.
Be careful with selling puts along these rallies. Don't assume it will go on forever. Once it reverses, it will reverse hard and you won't have time to react. Do still sell them as you should never fight the trend, but be conscious of the channel which will act as a magnet pulling the SP back down.

If you're caught with an ITM call within a bullish channel, identify its slope. Then you will have an idea of how ITM you can afford to be and still be able to play catchup.


The current channel goes up about $5 a week. Therefore, one way you can structure your rolls is to make sure you can roll them out for a $5 strike improvement every week. Right now a 5 DTE ATM call pays you about $5. Since the top of the channel reaches 187 by EOD next Friday, you then don't want to hold anything less than a -182.5C exp 5/26. If by EOD Friday it reaches and closes at 187.5, you can roll a 5/26 -182.5C to a 6/2 -187.5C for $0 or a small debit. This is how you can play catch up with a bullish channel. If you cannot roll to a 5/26 -182.5C, then maybe it's worth exploring other, longer dated options and bet on an eventual reversal to the mean, which means there has to be something on the calendar that will compel the market to take a more cautious stand: maybe a 1st quarterly GDP reading, an FOMC meeting, a monthly CPI release, the P&D report, etc... use these events as a potential temporary magnet for the SP and roll your calls to just before a target date if an ATM weekly roll is not affordable. This is what you should do if something like a November 2020 or November 2021 happens again. You have to do this early as the more ITM those calls get, the worse the rolls are going to get.
View attachment 939503

If you're already in the safe zone, there's nothing to worry about.

wow what a move today, we have gone quite a ways above your bullish channel, does that negate it and perhaps we have entered a new, parabolic phase?

 

[UltradoomY]

wow what a move today, we have gone quite a ways above your bullish channel, does that negate it and perhaps we have entered a new, parabolic phase?

I'm not sure what his answer is but I am not opening any (except for the calendar experiment I am doing) calls - I am looking at buying some cheap Puts before close today though - this week expiration I think the $180's for $1.15 each if I can get them.

I have a ton (for me) of shares and December 2025 leaps ($200's) so I am well covered for a run but I know it will pull back at sometime and a couple of cheap puts won't hurt.

Cheers (especially if you are selling me the $180's later)

Edit - went with the $185 P's for $2.25 each

 

[MikeC]

Rolled 8 of my 16x -c182.5 to next week -c185. Not a great roll and still ITM but at least I moved it up a little.