Wiki Selling TSLA Options - Be the House

[SpeedyEddy]

This post might be my most complete analysis going forward. Please note the clear distinction between possible / likely and impossible / unlikely. When I say possible, I'm speaking in the broadest of sense.

Thank you a lot @dl003 for this extensive analysis, that I only see you doing consistently. It is of very much help and I see the patterns that include some gap-filling on the fly too. Today seems to be a first test of it, but I am the last one to say you are wrong, so am using it for long accumilating
[Edit/ including put-selling (150 for jan '24, which I intend to roll for safety and/or profits and some -CC 380 for financing some of the share buys /Edit]

 

[adiggs]

I've been looking for a bit of a down day, which we have so far, and entered 240 csp for next week at 2.80.

I decided to be cash secured rather than doing put spreads, though I also considered put spreads. Something like a 235/230 for this week (vs 240 for next week) on a put spread -- only .05 in that spread, but on a $5 wide spread that's 1%. To be clear - I did not enter the put spread, its just an example of about what I'd be looking at were I entering one right now.


I didn't go for the put spread as I continue to think (and hope in the case of some DITM calls) that the share price is coming back down a fair bit. I don't expect something as low as 200, but 230 wouldn't surprise me, and I definitely do not want to sell put spreads in a situation where I expect the share price to be going down.

However just because I think it doesn't mean it'll happen, and up from here on what the market perceives as good inflation news and/or anticipation of earnings could keep us flat to up from here, and thus the csp to earn some income in this event. The csp will generate income down to 240, can be rolled down from there if the need arises, or I can buy shares at about what I think of as the middle of a wider and longer period trading range (720 i pre-split money).


In other news I've begun reading and studying EWT, and started the 30 day trial of tradingview. My intention is to be learning and beginning to incorporate more technical analysis in my own decision making. I can see that the road ahead is long and winding, but I expect a grand adventure.

 

[ReddyLeaf]

FYI, in case people didn’t see it in the main investor thread: it looks like some July rebalancing in the Nasdaq 100 is reducing weighting of large caps and increasing weighting of small caps. That probably explains the large number of 255-260-265 p/c spreads traded, all on July or August monthlies, so certainly whales. Red highlighted ones are bearish, green ones are bullish. Some, just minutes after the previous trade, like someone fat fingered the trade. At least there’s some karma: they had to go outside the bid-ask spread on some, just like us little retail traders.

Unfortunately, I didn’t get the memo until after the close. Initially, I thought I was the reason for the SP dropping, because I bought back a few Jan2025 -c200s during the MMD. Unfortunately, the MMD just kept on giving, and I could have saved a lot of cash.

 

[Jim Holder]

This post might be my most complete analysis going forward. Please note the clear distinction between possible / likely and impossible / unlikely. When I say possible, I'm speaking in the broadest of sense.

Let's start with a blank slate
View attachment 954868

On the above chart you will notice 2 areas red and blue. They cover the 1.618 and 1.236 projection of the first leg up from 102 to 217. This projection is begins from the correction low of 152.3.

The most important question right now is will we have a 3 wave or a 5 wave rally off the generational low of 102? If we have a 5 waver, then it is nearly impossible to make a new low. Extremely unlikely. If it's a 3 waver, then it is possible we make a new low.

A 5 waver will be numbered 12345 and a 3 waver will be lettered ABC. So we have wave 1/A from 102 to 217. Wave 2/B from 217 to 152.3. One of the most common level for wave C to terminate is the 100% projection of wave A, which put the big test at 268. As you can see. We had a false breakout and sharp rejection off that level one week before P&D. That's when I turned a bit defensive and prepared for a test of 217 should P&D miss estimates. Once P&D was released and it's a 20k beat, we decisively broke through 268 and the next big level is 296.

296 is big for a few reasons. Below this level, a 3 waver scenario is still possible. Plus, the big bad resistance trendline running from November 2021 hangs right on it. I think it's likely we'll reach 296 because of how the stock is currently positioning itself.

View attachment 954871

If you look at the last 2 times this resistance was tested, you can see 2 sharp rejections right at the contact point. This time we're flagging under it which is a bullish sign.

What happens after 296? Past 296 is 340, which is the 1.618 projection of wave 1/A. At this level, it becomes extremely likely that we're looking at a 5 waver. Therefore, it will take a stellar ER and outlook to get to it. If we rally to 340 post ER, most likely it won't be a bull trap on the longer timeframe (explanation below).

Technically, a dead cat bounce can still reach 340. However, since it is so far above the resistance trendline, a dead cat bounce will be extremely unlikely if 340 is reached. It's still possible, but unlikely.

If this is a 5 waver, the 1.618 projection of wave 1 (340) is the conventional limit for wave 3. From there, we can expect some profit taking and retest of the trendline around 270, before going up again at the end of the year. From 390, we can start an ABC correction to 212-250, which will coincide with the first half of 2024, a period traditionally weak for TSLA. From there we will be ready for a big run to 600+. Please note that the ABC correction doesn't have to end in 6 months. While the target remains 212-250, it can take longer than that, which it did before throughout TSLA history. A lot of factors can influence this timing.

View attachment 954875
Now, what if TSLA can't get to 340? Maybe the Cybertruck is delayed once more. Maybe gross margin will disappoints. If that happens, 296 will become the top of this leg up, which will return TSLA back into limbo, since a dead cat bounce is still likely at 296. From there, we would have 2 scenarios.

The first scenario is a retest of the 217 - 230 zone before a blockbuster Q3 ER which will take TSLA past 296. This is not a conventional setup and it's really difficult to predict the top of wave 5. We will still have an ABC correction that takes us back to 220 by June 2024.View attachment 954878

The second scenario is more grim. If macros deteriorates and the Fed implements more rate hikes, a big dead cat bounce from 102 to 296 can become a reality. The question then will be: will we make a new low, lower than 102? I think it's possible, but unlikely. I'm saying this because the drop to 102 was unnatural. Without Elon's selling, I don't think we would have dropped as far as we did. Therefore, it will take a literal disaster to break the 102 low if this turns out to be a dead cat. What I think might happen is we will start a benign triangle correction from 296 like this.

View attachment 954880

Therefore, my plan right now is:

Net long delta to 296, then close my positions and observe.
If we are rejected at 296, wait for a retest of 217-230.
If 217 holds, then net long delta for another test of the resistance trendline later this year, but I will know the subsequent correction will reach 217 minimum.
If 217 doesn't hold, then be defensive until we've bottomed out.
If we break 296, then net long delta to 340.
At 340, lighten up my position and prepare for the pullback to end at 270, then net long delta to 380.
At 380, close all long positions.

Thanks for the extensive write-up!

With $414 ATH not to far away from $380, what is your reasoning to close all long positions at $380. Is that a vote that TSLA won’t test ATH for some reason?

 

[Jim Holder]

Unusual bearish option flow today….
Doesn’t have to be Zuck and just a straight earnings play. Still interesting.

 

[intelligator]

Meeting of the minds is at 267.5, split between highest put and call OI at 250 and 280. MP is $270, put call ration .93, slightly more calls.

Gamma is positioned closer to MP, slight increase at p260, p265, retract p270, slight increase at c270, c275, c280. Setting up for a drain to below 266? I'll target 7/14 -c285 to pair with +p245/-p255 that I opened Friday. -p250 would have been the better sell.

 

[Max Plaid]

Already looking what to roll this week's 30x:45x -280 to next, with CPI, Tesla ER and FOMC all coming, IV looks pretty high with juicy premiums

A very sensible move would be to free-roll the -p280's down to -p270, keeping the -c280's at the same strike, not so great premiums, but moves from a straddle to a strangle, which is inherently less risky

Rolling the whole straddle to -270 or maintaining at -280 also possible, don't know yet

Edit:

- decided to roll the week's 45x -c280's to 54x 7/21 -c270 & BTC the remaining 9x 7/21 -c200's
- 30x -p280's still to treat before close on Friday, slight +ve net premium for a roll down to -c270, probably going to do that also today

Yes, earlier than usual, but with traveling all week it's not so straight-forwards, plus I'm wondering if we'll get some IV crush after CPI tomorrow...?

Edit 2:

- rolled 30x -p280 -> 7/21 -p270

Break-even on the whole lot, now down to 95x October -c200, which I will continue to but-back with weekly premiums, roll the remainder to December if necessary, then look to buy-back the 46x Dec -c300's too, although TBH I'm OK to sell off some LEAPS if the SP is that high at the end of the year

 

[adiggs]

Already looking what to roll this week's 30x:45x -280 to next, with CPI, Tesla ER and FOMC all coming, IV looks pretty high with juicy premiums

A very sensible move would be to free-roll the -p280's down to -p270, keeping the -c280's at the same strike, not so great premiums, but moves from a straddle to a strangle, which is inherently less risky

Rolling the whole straddle to -270 or maintaining at -280 also possible, don't know yet

Edit:

- decided to roll the week's 45x -c280's to 54x 7/21 -c270 & BTC the remaining 9x 7/21 -c200's
- 30x -p280's still to treat before close on Friday, slight +ve net premium for a roll down to -c270, probably going to do that also today

Yes, earlier than usual, but with traveling all week it's not so straight-forwards, plus I'm wondering if we'll get some IV crush after CPI tomorrow...?

Edit 2:

- rolled 30x -p280 -> 7/21 -p270

Break-even on the whole lot, now down to 95x October -c200, which I will continue to but-back with weekly premiums, roll the remainder to December if necessary, then look to buy-back the 46x Dec -c300's too, although TBH I'm OK to sell off some LEAPS if the SP is that high at the end of the year

Been thinking about doing something like what you do @Max Plaid - sort of a semi permanent straddle / strangle that makes use of higher premiums as risk mitigation. Just opened 260 strike puts for next week and 8.20. I either get shares for 252, earn a really nice profit, or roll if I feel like it.

 

[ReddyLeaf]

I placed a 7/7 IC order at the bid, it didn't fill. I'd revised it again at the bid, still didn't fill. Tried once more, the day ended, IC left unfilled and cancelled. It was probably meant to end this way.

FWIW, this morning I had the same problem. Had a IC 255/265/270/280 that the market refused to open $3.65, $0.05 below the midpoint. Cancelled it and split into the BPS and BCS sides and got it sold for $3.75! Crazy.

Anyone trading that massive August 260 straddle? Also, I didn’t realize that MaxPain is $240 (big straddle at 250) for next week!!!!!!!! Crazy. Looks like a lot of people are sitting out next week.

 

[Max Plaid]

Been thinking about doing something like what you do @Max Plaid - sort of a semi permanent straddle / strangle that makes use of higher premiums as risk mitigation. Just opened 260 strike puts for next week and 8.20. I either get shares for 252, earn a really nice profit, or roll if I feel like it.

If you keep rolling them ATM then I think there's a lot of Theta to be had...

That being said, if I wasn't trying to fix all those -c200's I wrote, I would be able to sell $1 - $2 weeklies an live like a king

But, as I said before, it'd quite a challenge and a lot of fun, and very low risk

 

[adiggs]

If you keep rolling them ATM then I think there's a lot of Theta to be had...

That being said, if I wasn't trying to fix all those -c200's I wrote, I would be able to sell $1 - $2 weeklies an live like a king

But, as I said before, it'd quite a challenge and a lot of fun, and very low risk

There's a lot of freedom in share backed cc and cash secured puts. Kind of weird being closer to the money, and feeling safer about the position.

 

[BornToFly]

Less than 10 hours until CPI and the market's reaction to it....

 

[MrMoo]

Less than 10 hours until CPI and the market's reaction to it....

If it's bad I fully expect Elon to Tweet Jerome is a cuck.

 

[Max Plaid]

PT upgrade from CITY and cold CPI as expected, way below consensus - FED going to look pretty dumb (well even dumber than they already do) if they raise rates from here

 

[traxila]

PT upgrade from CITY and cold CPI as expected, way below consensus - FED going to look pretty dumb (well even dumber than they already do) if they raise rates from here

View attachment 955551

It is their chosen vocation to look dumb. Any other appearance would be a strike on their resume.

 

[elasalle]

Good CPI print. SP heading higher into earnings.

Likely will close Jan 24 PUTS next Mon and wait till post earnings. Will close Fri 270 PUTS on the open as well.

Should we plan for NASDAQ rebalancing (July 24) ?

Market heavyweights dip ahead of Nasdaq 100 rebalance

Shares of Apple , Microsoft and other heavyweight companies dipped on Monday after Nasdaq Inc said it would rebalance its Nasdaq 100 index to address the benchmark's "overconcentration."

www.reuters.com

The adjustment will be based on shares outstanding as of July 3, with changes announced on July 14 and taking effect before the market opens on July 24

 

[tivoboy]

PT upgrade from CITY and cold CPI as expected, way below consensus - FED going to look pretty dumb (well even dumber than they already do) if they raise rates from here

View attachment 955551

i save the term WAY for differentials greater than this and quite frankly while Consensus was what it was, ATL fed and rolling 30 day inflation reads predicted a beat.

And, they will certainly raise 25 bps still for July, thats my operating thesis - but I don’t think anyone cares at this point in the cycle or the read on inflation. We’re going to continue to rally a TAD more, more in some areas than others, and if they raise it won’t be de-railed and if they DON’T raise it will rally a tad stronger, but possibly reverse.

 

[adiggs]

PT upgrade from CITY and cold CPI as expected, way below consensus - FED going to look pretty dumb (well even dumber than they already do) if they raise rates from here

View attachment 955551

One dynamic that is at work with the US Fed, inflation, and interest rates might be thought of as PTSD from inflation in the early '80s. There's a strongly held belief that an important component of what dragged that out and made it so bad is that the Fed of that time did not respond aggressively enough, consistently enough, or long enough. And as a result the inflation settled in to stay and became the norm instead of something unusual.

It leads to a pretty strong bias towards 1 (or 2!) rate increases too many, rather than 1 too few. Back then, apparently, there was a steady cycle of getting a good looking inflation print followed by the Fed declaring victory and no longer taking action.


I'm on the other side of where I think the Fed will be going. At minimum we can count on the Fed talking tough, trying to use words to bring down inflation if they're not raising rates. My best guess is that the Fed will intentionally do 1 more quarter point rate hike than they think they need to do, even if they're afraid that it will be the 2nd or 3rd rate hike too many. The fear is that the longer the higher inflation lingers, the more likely that it just settles in and becomes persistent.

Remember as well the dual mandate of the Fed. Moderate inflation and full employment, which I believe translates to 2-2.5% inflation target, with 4% unemployment. The fact that unemployment is still so low, while inflation is running so high above target, is an indicator that the system has some slack for further interest rate raises.

 

[MikeC]

No action on this thread today?

I'm watching -c280s and a -c275/-p275 for this week. Rolls to next week get nice strike improvement so I'll be happy to stay in this range but feels like we might keep going a bit to burn call-selling 0 DTE gamblers. Closed all puts at 270 and 265 and will probably wait until tomorrow for a dip to reopen some for next week.

 

[Oil4AsphaultOnly]

What do y'all think? Macros (and yesterday's CPI) seems to think we're in a bull run, which could take TSLA with it. But most of the time, there seems to be hesitancy with TSLA, because gross margins are expected to be lower during the earnings call.

I think the bull run is just FOMO, but when in doubt, play both sides, so I opened a few IC for next week, leaving my margin unused until after earnings.