Wiki Selling TSLA Options - Be the House

[Yoona]

Awesome post Yoona, thank you Another point to consider is that although technically the data shows “max loss” on the call side due to the Jan. 2023 post earnings run, $TSLA did come back down to ~$152 on April 27. It would have been a painful 3 months but even in that extreme scenario one could have recovered all or nearly all of the ”loss” by buying back into TSLA in late April. Curious if there is a way to account for this in your analysis, but of course there was no guarantee that it would have retraced to that extent. Thanks again you are a blessing to this forum

nope; if you sold a CC the week of Jan 27, 2023 using

• 5% OTM (140.09 CC)
• 8% OTM (144.09 CC)
• 10% OTM (146.76 CC)
• 12% OTM (149.43 CC)
• 15% OTM (153.43 CC)
• my IC prediction (160.48 CC)

you would still be ITM today.

stock was 153.75 on apr 26, but that was a wednesday; that week closed at 164.31

but technically you are right, you could have closed it mid-week for probably break-even

very good catch, i need to consider the mon-thurs OTM scenario in my study, thx

 

[OptionsGrinder]

nope; if you sold a CC the week of Jan 27, 2023 using

• 5% OTM (140.09 CC)
• 8% OTM (144.09 CC)
• 10% OTM (146.76 CC)
• 12% OTM (149.43 CC)
• 15% OTM (153.43 CC)
• my IC prediction (160.48 CC)

you would still be ITM today.

stock was 153.75 on apr 26, but that was a wednesday; that week closed at 164.31

but technically you are right, you could have closed it mid-week for probably break-even

very good catch, i need to consider the mon-thurs OTM scenario in my study, thx

More thinking…. What if you had the 150cc at 15% OTM, and got blown out that week… if you simply waited to the end of the week and rolled to the same strike the following week, and each successive week thereafter until late April, you would be picking up some extrinsic value each week, even if minimal, and less so when the SP got up around 200.. but as it came back down toward $150 the extrinsic value associated with each ITM roll would increase.. and for those 3 months would have been worth some number of points.. curious how much.. just a thought

 

[StarFoxisDown!]

Any thoughts about Tesla raising car prices next year since the tax credit will become instant? Tesla can claim that their vehicle are more affordable since the monthly payment would be lower. If Tesla increases prices by a decent margin it can set a big rally.

I don’t want to clutter this thread since it’s geared more towards options and TSLA share price movements. But to sum it up, it’s very unclear if the instant credit rebate will have a big effect because there’s still the issue of awareness when it comes to Tesla’s, their low costs, misinformation geared towards EV’s in general.

 

[adiggs]

This is why I prefer calendar spreads as they behave like CSP, sure you pay more up-front for the long leg, but over 20-30 weeks the cost averages out quite low. TBH even when I have hit my cash target, I'm still going to keep some loing shitputs, just to cover off that pesky swan that flies in from time to time

You mention keeping some long shitputs around to cover for the pesky swans and stuff.

If you were buying today what sort of date and strike would you be looking at? What goes into your decision making for finding that option? Sizing is also nice, but maybe more in terms of % of position size rather than absolute count of contracts. E.g. if you like to sell 100 puts at a time, do you try to have 100 of those long puts, 50 (half as many), 200 (2x as many)?

Thanks!

 

[Cherry Wine]

I guess it depends. Imagine selling bull put spreads back in July - Oct 2022, the share price was between 270-300, reasonably range-bound, selling -p250/+p220's would seem a good bet. But then 29th September the dump to $100 began, almost, but not quite in a straight line down. Anyone tryng to roll a spread through that would have triggered multiple total-loss events

This is why I prefer calendar spreads as they behave like CSP, sure you pay more up-front for the long leg, but over 20-30 weeks the cost averages out quite low. TBH even when I have hit my cash target, I'm still going to keep some loing shitputs, just to cover off that pesky swan that flies in from time to time

I've been hedging my shares with long puts since earlier this year, purchased and/or rolled at times when the stock price spikes up. The peace of mind has been priceless.

 

[jeewee3000]

I've been hedging my shares with long puts since earlier this year, purchased and/or rolled at times when the stock price spikes up. The peace of mind has been priceless.

Do you mean short term puts? (Say we hit a local high of 260 and you buy 200 puts 1 to 3 months away?)

Or are we talking LEAP puts (Jan2026 150 puts or something)?

 

[Max Plaid]

You mention keeping some long shitputs around to cover for the pesky swans and stuff.

If you were buying today what sort of date and strike would you be looking at? What goes into your decision making for finding that option? Sizing is also nice, but maybe more in terms of % of position size rather than absolute count of contracts. E.g. if you like to sell 100 puts at a time, do you try to have 100 of those long puts, 50 (half as many), 200 (2x as many)?

Thanks!

I didn't do it enough yet to make a "rule of thumb", but I bought March +p200's on 9/22 for $12.49 when the SP was trading around $250, but tbh I could have got them a few days earlier for far less, but there you go

I had intended to buy 100x, but somehow ended up with 200x, whether this was a fat-finger trade or a technical broker issue, I don't know, but I decided to keep them

I initially bought them for downside insurance as I was (rightly) feeling bearish going into the year end, but also decided to sell puts against them

The mistake I made was, as usual, selling ATM's, so that when the SP dropped into the 190's, I couldn't capitalise - at one moment they were worth 2x and that was the moment to offload them or maybe half, in the end I did sell 100x for a reasonable profit, I still have 100x now, only worth around 40% of initial value, might just keep them until expiry

What I did do right, when we we below $200 end of October, was to buy March +c240's, so the other side of the trade, sold those off for >2x profits and bought 100x March +c280's instead, which are also profitable as of now as well

So waiting for a pop to buy puts, sell "safe" weeklies againt them, sell them when the SP dumps, buy calls, sell wekklies, sell them on the pop -> that's the idea anyway and I'm looking around 6 months TE and $10 - $15 cost per contract, feels about right, then look to sell $1 weekly premium to 2x the initial cost

Looking at July +c200's now to keep it going, waiting for a dump for grabbing more calls

I did also buy 100x Jan 19th +c300's for a $3, used these several times to help roll large CC's, but they're also there in case of a great P&D (although I way less confident of that now...)

 

[thenewguy1979]

So in theory - I can load up on March 15 160 put for 1.16. Then if we dump in Q1 I can sell Puts and used those long leg as insurance. Also the long Puts can also appreciates in values themselves so double win. Guess the opposite can be done on buying long dated Call and then sell short against them if stock pump.

Wondering mind is asking why if someone already have stocks and using the wheel. Why spend more on “insurance”, unless not wanting to parts with those shares. Edit - peace of mind from Cherry Wine….

Thanks Max and Yoona for sharing the different strategy.

 

[Tate Legacy]

TSLA Rolling - does it work?

I have 100+ stats, and this is my 2nd most important one.

Since 2021, if your OTM weekly put/call is breached, there's a high probability of recovery if you roll instead of taking the loss. You don't need to roll for strike improvement, but you will be OTM faster if you do.

View attachment 1002630

View attachment 1002604

This is best explained using an example. Refer to the above Oct 7, 2022.

Friday Sep 30, 2022 Close = 265.25. Around 3pm, you decide you want to sell 12% OTM 7DTE for next week Oct 7. The bet is 233.42 put, 297.08 call. This could be a CC, Short Strangle, CSP, IC, whatever. (Sorry, this study isn't for Short Straddle or Iron Butterfly).

One week later, on Oct 7, stock closed at 223.07. Your call is safe, but your put is ITM. What to do?

• you can take the loss, if you want
• you can roll the put using the same strike (-p233.42) to next week; if you do that, you would be rolling for 35 weeks straight before it goes OTM (Jun 9, 2023 Fri Close 244.40). This is the best scenario because weekly ITM/ATM credits are huge, but you need a strong stomach because of the bottomless pit.
• you can roll the put on a 5-strike improvement (-p233.43 change to -p228.43) to next week; if you do that, you would be rolling for 3 weeks straight (instead of 35 weeks!) before it goes OTM (Oct 28, 2022 Fri Close 228.52).
• you can roll the put on a 10-strike improvement (-p233.43 change to -p223.43) to next week; if you do that, you would be rolling for 3 weeks straight (instead of 35 weeks!) before it goes OTM (Oct 28, 2022 Fri Close 228.52).

As you can see from the put side above, whether your 7DTE bet is 12% or 15% or my IC prediction, there is NO "max loss" situation. Maybe you don't have income during the roll weeks, but at least there is no loss. Your rolled position will go OTM eventually. And this makes sense, as the stock market is generally bullish in nature. Stocks tend to go up long-term, so your ITM put will be rescued tomorrow if not today.

Summary for puts: In the last 155 weeks starting 2021,

• if your 7DTE put bet is 12% OTM, it will be breached only 10 times (6.45%). Of those 10, they are all rescued simply by rolling. This means max loss probability is 0/155.
• if your 7DTE put bet is 15% OTM, it will be breached only 5 times (3.23%). Of those 5, they are all rescued simply by rolling. This means max loss probability is 0/155.
• if your 7DTE put bet is my IC prediction, it will be breached only 4 times (2.58%). Of those 4, they are all rescued simply by rolling. This means max loss probability is 0/155.
• whether you decide on 0- or 5- or 10-strike improvement, they are all rescued at some point in time.

Now the calls. Same as puts except there is a max loss situation (red cells). If your call was breached on Jan 27, 2023, no amount of rolling will rescue it if your 7DTE bet was 12% or 15%. But if you used my IC prediction, it is rescued after rolling straight for 12 weeks on a 5-strike improvement.

Summary for calls: In the last 155 weeks starting 2021,

• if your 7DTE call bet is 12% OTM, it will be breached only 10 times (6.45%). Of those 10, 9 are rescued simply by rolling. This means max loss probability is 1/155.
• if your 7DTE call bet is 15% OTM, it will be breached only 4 times (2.58%). Of those 4, 3 are rescued simply by rolling. This means max loss probability is 1/155.
• if your 7DTE call bet is my IC prediction, it will be breached only 5 times (3.23%). Of those 5, 4 are rescued simply by rolling. This means max loss probability is 1/155 if 0-strike improvement. Max loss probability is 0/155 if 5-strike improvement.
• calls are riskier than puts (there is possibility of max loss whether you bet 12% or 15% or my IC prediction)

By max loss, i mean the shorts are breached.

What is the #1 key lesson i learned from this exercise? PULLBACK. Stocks will, at some point, reverse and test TA. No one goes up or down forever in a straight line. For puts, it could be a 35-week wait before reversal comes. For calls, there is a risk of max loss (but 1/155 is tiny).

Note that this study involves only 12% OTM, 15% OTM, and my IC prediction. If you are aggressive ATM or too close to the sun, results may vary and your rolling may suck. Send me a list and I'll check.

NOT ADVICE. Nope. I am not your financial advisor. I am a newbie trader!

Merry Christmas

 

[Max Plaid]

So in theory - I can load up on March 15 160 put for 1.16. Then if we dump in Q1 I can sell Puts and used those long leg as insurance. Also the long Puts can also appreciates in values themselves so double win. Guess the opposite can be done on buying long dated Call and then sell short against them if stock pump.

Wondering mind is asking why if someone already have stocks and using the wheel. Why spend more on “insurance”, unless not wanting to parts with those shares. Edit - peace of mind from Cherry Wine….

Thanks Max and Yoona for sharing the different strategy.

Time and Delta... those calls will go to zero unless the SP rises, so you need to generate more income on them than they cost before that happens

With shares and cash the Delta is always 1 and neither expires, so my preference would always be that, but then long puts and calls can be added for insurance, a bit oif leverage and margin protection

And, as a general rule, when stock dumps, you need to be selling calls, then puts on the way back up, at least that should be the bias, any short positions in the direction of the price should be very OTM

At least that's my good advice, easy to give to others, but hard to follow for myself

 

[thenewguy1979]

Time and Delta... those calls will go to zero unless the SP rises, so you need to generate more income on them than they cost before that happens

With shares and cash the Delta is always 1 and neither expires, so my preference would always be that, but then long puts and calls can be added for insurance, a bit oif leverage and margin protection

And, as a general rule, when stock dumps, you need to be selling calls, then puts on the way back up, at least that should be the bias, any short positions in the direction of the price should be very OTM

At least that's my good advice, easy to give to others, but hard to follow for myself

Thanks Max. Merry Christmas.

Would one of those key benefit is I can reuse those long dated call to keep on selling short call against them till they expired or get assigned?

So If I buy March $300 call for 8. Stock started to pump now til then. I can do weekly call selling and dont have to buy any long call. Say 260 one week, then 270, then 280, repeat…. That is if sp keep rising.

I guess with the theory stock only goes up then long dated call are of more value then long dated puts. Do notice the $200 put are 1/2 price vs $300 call.

 

[MikeC]

Thanks Max. Merry Christmas.

Would one of those key benefit is I can reuse those long dated call to keep on selling short call against them till they expired or get assigned?

So If I buy March $300 call for 8. Stock started to pump now til then. I can do weekly call selling and dont have to buy any long call. Say 260 one week, then 270, then 280, repeat…. That is if sp keep rising.

I guess with the theory stock only goes up then long dated call are of more value then long dated puts. Do notice the $200 put are 1/2 price vs $300 call.

Keep in mind if SP rises too quickly, that 260 can go ITM and lose value a lot faster than the March 300 gains value. Worst case that spread could end up -$40. That's why you generally want to keep your short strike above your long strike.

 

[adiggs]

Thanks Max. Merry Christmas.

Would one of those key benefit is I can reuse those long dated call to keep on selling short call against them till they expired or get assigned?

So If I buy March $300 call for 8. Stock started to pump now til then. I can do weekly call selling and dont have to buy any long call. Say 260 one week, then 270, then 280, repeat…. That is if sp keep rising.

I guess with the theory stock only goes up then long dated call are of more value then long dated puts. Do notice the $200 put are 1/2 price vs $300 call.

Keep in mind if SP rises too quickly, that 260 can go ITM and lose value a lot faster than the March 300 gains value. Worst case that spread could end up -$40. That's why you generally want to keep your short strike above your long strike.

Adding on to this - a broader generalization is that whether you're talking about same expiration on long and short options, or different expirations, you're still talking about spreads. And the central fact of their existence is that spreads just behave differently than cash secured puts and share backed calls. They can theoretically be used to substitute for each other, but they really are very different animals.

Profit and loss develop in different ways. Max loss arrives really, really fast on the spreads. There's more.


The closest thing to advice I would offer here is to do some single option spreads. Repeat until one goes ITM. Do some spread rolls. Get to know them a bit - not just what you've read and studied, but also get some experience with them. A single $10 wide spread is $1000 - $1000 is a pretty cheap education in just about any field. This isn't a one time position - you'll want to experience winning AND losing AND rolling to an eventual win AND rolling to an eventual loss (you can be really aggressive with a single position).

These elements are an important component of why @Yoona talks about and uses wide spreads. A $30 wide spread has a wider range in which it behaves like a CSP or CC than does a $10 wide spread. A $100 wide spread has an even wider range in which it behaves like its more simpler cousin. At least for me - another reason I use wide spreads is that it forces me to keep my leverage down


Spreads are different animals. They can be hugely profitable. They can wipe out an account. Both of those in ways plain CSP and share backed CC can't. Finding your own balance will be part of your own decision making, and your own consequences that you will experience.

 

[thenewguy1979]

Adding on to this - a broader generalization is that whether you're talking about same expiration on long and short options, or different expirations, you're still talking about spreads. And the central fact of their existence is that spreads just behave differently than cash secured puts and share backed calls. They can theoretically be used to substitute for each other, but they really are very different animals.

Profit and loss develop in different ways. Max loss arrives really, really fast on the spreads. There's more.


The closest thing to advice I would offer here is to do some single option spreads. Repeat until one goes ITM. Do some spread rolls. Get to know them a bit - not just what you've read and studied, but also get some experience with them. A single $10 wide spread is $1000 - $1000 is a pretty cheap education in just about any field. This isn't a one time position - you'll want to experience winning AND losing AND rolling to an eventual win AND rolling to an eventual loss (you can be really aggressive with a single position).

These elements are an important component of why @Yoona talks about and uses wide spreads. A $30 wide spread has a wider range in which it behaves like a CSP or CC than does a $10 wide spread. A $100 wide spread has an even wider range in which it behaves like its more simpler cousin. At least for me - another reason I use wide spreads is that it forces me to keep my leverage down


Spreads are different animals. They can be hugely profitable. They can wipe out an account. Both of those in ways plain CSP and share backed CC can't. Finding your own balance will be part of your own decision making, and your own consequences that you will experience.

Got it Adiggs - Be the House not sell the House

Merry Chrismas.

 

[Arul]

Merry Christmas

Mrrry Christmas

 

[Arul]

TSLA Rolling - does it work?

I have 100+ stats, and this is my 2nd most important one.

Since 2021, if your OTM weekly put/call is breached, there's a high probability of recovery if you roll instead of taking the loss. You don't need to roll for strike improvement, but you will be OTM faster if you do.

View attachment 1002630

View attachment 1002604

This is best explained using an example. Refer to the above Oct 7, 2022.

Friday Sep 30, 2022 Close = 265.25. Around 3pm, you decide you want to sell 12% OTM 7DTE for next week Oct 7. The bet is 233.42 put, 297.08 call. This could be a CC, Short Strangle, CSP, IC, whatever. (Sorry, this study isn't for Short Straddle or Iron Butterfly).

One week later, on Oct 7, stock closed at 223.07. Your call is safe, but your put is ITM. What to do?

• you can take the loss, if you want
• you can roll the put using the same strike (-p233.42) to next week; if you do that, you would be rolling for 35 weeks straight before it goes OTM (Jun 9, 2023 Fri Close 244.40). This is the best scenario because weekly ITM/ATM credits are huge, but you need a strong stomach because of the bottomless pit.
• you can roll the put on a 5-strike improvement (-p233.43 change to -p228.43) to next week; if you do that, you would be rolling for 3 weeks straight (instead of 35 weeks!) before it goes OTM (Oct 28, 2022 Fri Close 228.52).
• you can roll the put on a 10-strike improvement (-p233.43 change to -p223.43) to next week; if you do that, you would be rolling for 3 weeks straight (instead of 35 weeks!) before it goes OTM (Oct 28, 2022 Fri Close 228.52).

As you can see from the put side above, whether your 7DTE bet is 12% or 15% or my IC prediction, there is NO "max loss" situation. Maybe you don't have income during the roll weeks, but at least there is no loss. Your rolled position will go OTM eventually. And this makes sense, as the stock market is generally bullish in nature. Stocks tend to go up long-term, so your ITM put will be rescued tomorrow if not today.

Summary for puts: In the last 155 weeks starting 2021,

• if your 7DTE put bet is 12% OTM, it will be breached only 10 times (6.45%). Of those 10, they are all rescued simply by rolling. This means max loss probability is 0/155.
• if your 7DTE put bet is 15% OTM, it will be breached only 5 times (3.23%). Of those 5, they are all rescued simply by rolling. This means max loss probability is 0/155.
• if your 7DTE put bet is my IC prediction, it will be breached only 4 times (2.58%). Of those 4, they are all rescued simply by rolling. This means max loss probability is 0/155.
• whether you decide on 0- or 5- or 10-strike improvement, they are all rescued at some point in time.

Now the calls. Same as puts except there is a max loss situation (red cells). If your call was breached on Jan 27, 2023, no amount of rolling will rescue it if your 7DTE bet was 12% or 15%. But if you used my IC prediction, it is rescued after rolling straight for 12 weeks on a 5-strike improvement.

Summary for calls: In the last 155 weeks starting 2021,

• if your 7DTE call bet is 12% OTM, it will be breached only 10 times (6.45%). Of those 10, 9 are rescued simply by rolling. This means max loss probability is 1/155.
• if your 7DTE call bet is 15% OTM, it will be breached only 4 times (2.58%). Of those 4, 3 are rescued simply by rolling. This means max loss probability is 1/155.
• if your 7DTE call bet is my IC prediction, it will be breached only 5 times (3.23%). Of those 5, 4 are rescued simply by rolling. This means max loss probability is 1/155 if 0-strike improvement. Max loss probability is 0/155 if 5-strike improvement.
• calls are riskier than puts (there is possibility of max loss whether you bet 12% or 15% or my IC prediction)

By max loss, i mean the shorts are breached.

What is the #1 key lesson i learned from this exercise? PULLBACK. Stocks will, at some point, reverse and test TA. No one goes up or down forever in a straight line. For puts, it could be a 35-week wait before reversal comes. For calls, there is a risk of max loss (but 1/155 is tiny).

Note that this study involves only 12% OTM, 15% OTM, and my IC prediction. If you are aggressive ATM or too close to the sun, results may vary and your rolling may suck. Send me a list and I'll check.

NOT ADVICE. Nope. I am not your financial advisor. I am a newbie trader!

Good analysis. Thanks. I want to start iron condor by next year after learning a bit. But here i dont see any of trades ? where can i find them.

 

[Arul]

Mrrry Christmas

Merry christmas

 

[Arul]

5,8,10: this is Short Straddle / Iron Butterfly territory now

all Call max losses are in 2023

View attachment 1002735
View attachment 1002738

Merry chrismas

 

[Jim Holder]

Good analysis. Thanks. I want to start iron condor by next year after learning a bit. But here i dont see any of trades ? where can i find them.

Over here we mainly discuss strategies and education, everybody makes their own decisions as to what trades to put on, when to close them, etc. This forum is not an alert service.

 

[Yoona]

Adding on to this - a broader generalization is that whether you're talking about same expiration on long and short options, or different expirations, you're still talking about spreads. And the central fact of their existence is that spreads just behave differently than cash secured puts and share backed calls. They can theoretically be used to substitute for each other, but they really are very different animals.

Profit and loss develop in different ways. Max loss arrives really, really fast on the spreads. There's more.


The closest thing to advice I would offer here is to do some single option spreads. Repeat until one goes ITM. Do some spread rolls. Get to know them a bit - not just what you've read and studied, but also get some experience with them. A single $10 wide spread is $1000 - $1000 is a pretty cheap education in just about any field. This isn't a one time position - you'll want to experience winning AND losing AND rolling to an eventual win AND rolling to an eventual loss (you can be really aggressive with a single position).

These elements are an important component of why @Yoona talks about and uses wide spreads. A $30 wide spread has a wider range in which it behaves like a CSP or CC than does a $10 wide spread. A $100 wide spread has an even wider range in which it behaves like its more simpler cousin. At least for me - another reason I use wide spreads is that it forces me to keep my leverage down


Spreads are different animals. They can be hugely profitable. They can wipe out an account. Both of those in ways plain CSP and share backed CC can't. Finding your own balance will be part of your own decision making, and your own consequences that you will experience.

3 more tools for success:

1) backtesting - this provides visual solid evidence that your strategy works and allows you to assess your risk and make data-driven improvements. The main purpose is so that you can limit your risks. More importantly, it allows you to control emotions because of rules you set out beforehand. Past performance is no guarantee of future results, but 703 weeks are compelling data.

2) gamma exposure - know where market participants are in on the action. Tallest +/- gammas are magnets (but dealers don't have to hedge until price reaches those gammas).

For tall +gammas, dealers will buy TSLA as price approaches it from below and sell TSLA as price passes it to cap the upside.

For tall -gammas, dealers will sell TSLA as price approaches it from above and buy TSLA as price passes it to cap the downside.

3) delta - the picture tells the whole story; the lower the delta (5 to 10), the higher the win rate (97.92%). Yeah, yeah, i know, little income. But risk management is important, you should want the win more than the income.

The eye-opener is that in the last 3 yrs, 22 stocks are better than TSLA for BPS. I am going to map them out to see R/R...