Wiki Selling TSLA Options - Be the House

[Arul]

What I would do, Jim, is sell aggressive weekly short calls, using these as the long-leg of calendar spreads -> that's kinda what I do anyway

I'd start ATM or even slightly ITM, say $10, if the SP drops more, you'll already make a decent whack, if it reverses, well then you'll have between 5 and 100 weeks to sort them out

The 2025 LEAPS I wouldn't stress too much about myself, sell $1 weekly against those and you'll recuperate the premium

Or just sell $1 weeklies against the lot, the April -c205's would be bought-back after 2 weeks...

Not advice and all that, you know I'm a financial moron, etc...

What do you mean by selling $1 weekelies ?

 

[BornToFly]

What do you mean by selling $1 weekelies ?

What ever strike gives you $1 every week.

 

[ProfessorZoom]

I stopped following that account as it became totally unhinged...

Yeah that guy is insane. I remember when he kept saying TSLA was mooning because the "Tesla Phone" got leaked

 

[Jim Holder]

Sell aggressive weekly short calls, using these as the long-leg of calendar spreads.

I'd start ATM or even slightly ITM, say $10, if the SP drops more, you'll already make a decent whack, if it reverses, well then you'll have between 5 and 100 weeks to sort them out

The 2025 LEAPS I wouldn't stress too much about myself, sell $1 weekly against those and you'll recuperate the premium

Or just sell $1 weeklies against the lot, the April -c205's would be bought-back after 2 weeks...

Thanks. So in this scenario it means for example, selling 37 CCs against the 37 long calls I have, aiming for about $3.50/week ($12,900) which is about $175-$185 strike down here (aiming for $10/week is ATM and kinda risky), and roll up and out if needed. In two months that’ll bring in about $100k if my math is correct. Not bad. That’s in addition to my regular writing safer further out CCs on the rest of my longs (scalping as I’ve been doing). Although with some caution in case we get a strong DCB or other surprise that may run them over (as @dl003 suggested to short down here at our own risk).

Also, is there any “protection” the bought calls are giving me that I am writing against, and what is it?

 

[Jim Holder]

If rolling 1:1 and keeping same number of contracts by adding cash, a lower SP is more favorable, because the 100c will lose more absolute value than the higher strike.

Can you elaborate a bit on this. I thought lower strikes are not affected as much from more downside but has greater exposure to upside. I could be completely wrong of course.

 

[Jim Holder]

From this perspective we should be done or very close. $163-$159 max followed by possible target as high as $355 in the next phase (gradually and zig-zaggy of course).

Credit: StockWaves

 

[intelligator]

Thanks. So in this scenario it means for example, selling 37 CCs against the 37 long calls I have, aiming for about $3.50/week ($12,900) which is about $175-$185 strike down here (aiming for $10/week is ATM and kinda risky), and roll up and out if needed. In two months that’ll bring in about $100k if my math is correct. Not bad. That’s in addition to my regular writing safer further out CCs on the rest of my longs (scalping as I’ve been doing). Although with some caution in case we get a strong DCB or other surprise that may run them over (as @dl003 suggested to short down here at our own risk).

Also, is there any “protection” the bought calls are giving me that I am writing against, and what is it?

Depending on the bought call to sold call width, wouldn't you need quite a bit of margin? You have lots of shares. How would you write against the bought calls and not see those sold calls paired with the shares? Fidelity wants to pair to reduce margin when possible. Does your broker treat different?

 

[MikeC]

Can you elaborate a bit on this. I thought lower strikes are not affected as much from more downside but has greater exposure to upside. I could be completely wrong of course.

If you look at the option chain: 100 strike calls (any exp) are down more than 180 strike calls on an absolute basis, even though the 180 strike is down more on a percentage basis. Because the 100 strike is a higher dollar amount - even a lower percentage of that is a higher absolute amount.

If you’re exchanging contracts 1:1, you can see that you would want a low stock price because you will be saving more on your BTO low-strike than you’re losing on your STC high-strike.

If you’re closing more contracts than you open, it’s a different story.

 

[Knightshade]

I agree with pretty much everything you said. But don't you think this is getting priced in now with a 32% drop in 2.5 months?

Depends who is doing the pricing. There's STILL folks in the other thread sure Troy is clueless on his estimates and Tesla has some magic deliveries rabbit to pull to hit 2.4M or whatever this year. Hopium is a helluva drug. I'd like to say Q1 PD will be a wakeup call, but based on history they'll just find more excuses that aren't Teslas fault and will be sure they'll magically catch up later in the year despite having no plan for how that'd be possible.



So s the current price reasonable?

As a car company, which is still the vast majority of all revenue, PE is still insanely too high at current stock price and vehicle margins and expected sales (esp. once you back out the one-time tax thing from last quarter)--so if you don't expect the financials to reflect being more than a car company this year then it's still going down when they post a terrible PD in a couple weeks and it becomes obvious even 2 million this year will be a stretch and higher is out of the question.

As a car company with an energy business that's starting to become significant you might have a different opinion... energy was only 6% of total revenue in 2023 though, and even Q4 was only up 10% YoY despite the megapack factory outputting. This is the one place there MIGHT be a positive surprise in the Q1 figures-- and again I doubt it'll be anywhere NEAR enough to offset the lack of growth in auto we might at least see energy revenue hit 10% or better of total revenue and maybe convince a few more folks there's more than a car company here and maybe the high PE isn't quite as crazy when if Lathrop is ramping well and we know another such factory is building now in China.


As an "AI" company? Pure and utter fantasy right now. Made worse by the overhang of Elons comp package and his threatening to develop all the cool stuff somewhere else if his demands for 25% of voting control isn't met. Same with robots and self driving*


*RTs aren't happening this year. Nor anything close to em. But it's POSSIBLE we'd see a big improvement in how good an L2 system Tesla offers-- enough that the take rate on FSD, even at L2, improves materially. This, like energy, isn't going to be enough money to get us back to ~30% margins or anything- but it'd be a welcome and positive surprise--- and also bode well for next year when it would get more widely available in the better version in the EU and/or China.

The only remaining chunk of the business is services and other...about 8.5% of revenue in 2023.... Used car prices have continued declining so the previous good news there is gone... Superchargers make a bit, and they're opening up now... but there's so (relatively) few cars who'll be using them in 2024 this isn't likely to be material financially. We MIGHT get a bit of a bump from recognizing deferred FSD revenue from overseas late in the year, but that requires fast moving regulators so good luck and take rate was never high there anyway... so I don't see a big bump here either outside of my maybe-L2-gets-way-better-enough-to-attrack-buyers thought.


So- and again I freely admit this is me just being overly rational about a market that's frequently anything but-- I don't see why anybody who isn't buying TSLA today at $169 would have any interest in doing so at $200 (let alone the $300 someone suggested) in a year where sales and revenue will be largely flat-- and FCF will likely be even worse than last years 42% YoY decline.


That's good news I guess for someone sitting on cash who wants to get in cheap for the growth phase kicking back in late 2025 and especially 2026 and on.... it's less good news for anyone holding shares who might want/need to get rid of em anytime soon.

 

[Jim Holder]

If you look at the option chain: 100 strike calls (any exp) are down more than 180 strike calls on an absolute basis, even though the 180 strike is down more on a percentage basis. Because the 100 strike is a higher dollar amount - even a lower percentage of that is a higher absolute amount.

If you’re exchanging contracts 1:1, you can see that you would want a low stock price because you will be saving more on your BTO low-strike than you’re losing on your STC high-strike.

If you’re closing more contracts than you open, it’s a different story.

That’s a real good insight! Thank you.

 

[Jim Holder]

Depends who is doing the pricing. There's STILL folks in the other thread sure Troy is clueless on his estimates and Tesla has some magic deliveries rabbit to pull to hit 2.4M or whatever this year. Hopium is a helluva drug. I'd like to say Q1 PD will be a wakeup call, but based on history they'll just find more excuses that aren't Teslas fault and will be sure they'll magically catch up later in the year despite having no plan for how that'd be possible.



So s the current price reasonable?

As a car company, which is still the vast majority of all revenue, PE is still insanely too high at current stock price and vehicle margins and expected sales (esp. once you back out the one-time tax thing from last quarter)--so if you don't expect the financials to reflect being more than a car company this year then it's still going down when they post a terrible PD in a couple weeks and it becomes obvious even 2 million this year will be a stretch and higher is out of the question.

As a car company with an energy business that's starting to become significant you might have a different opinion... energy was only 6% of total revenue in 2023 though, and even Q4 was only up 10% YoY despite the megapack factory outputting. This is the one place there MIGHT be a positive surprise in the Q1 figures-- and again I doubt it'll be anywhere NEAR enough to offset the lack of growth in auto we might at least see energy revenue hit 10% or better of total revenue and maybe convince a few more folks there's more than a car company here and maybe the high PE isn't quite as crazy when if Lathrop is ramping well and we know another such factory is building now in China.


As an "AI" company? Pure and utter fantasy right now. Made worse by the overhang of Elons comp package and his threatening to develop all the cool stuff somewhere else if his demands for 25% of voting control isn't met. Same with robots and self driving*


*RTs aren't happening this year. Nor anything close to em. But it's POSSIBLE we'd see a big improvement in how good an L2 system Tesla offers-- enough that the take rate on FSD, even at L2, improves materially. This, like energy, isn't going to be enough money to get us back to ~30% margins or anything- but it'd be a welcome and positive surprise--- and also bode well for next year when it would get more widely available in the better version in the EU and/or China.

The only remaining chunk of the business is services and other...about 8.5% of revenue in 2023.... Used car prices have continued declining so the previous good news there is gone... Superchargers make a bit, and they're opening up now... but there's so (relatively) few cars who'll be using them in 2024 this isn't likely to be material financially. We MIGHT get a bit of a bump from recognizing deferred FSD revenue from overseas late in the year, but that requires fast moving regulators so good luck and take rate was never high there anyway... so I don't see a big bump here either outside of my maybe-L2-gets-way-better-enough-to-attrack-buyers thought.


So- and again I freely admit this is me just being overly rational about a market that's frequently anything but-- I don't see why anybody who isn't buying TSLA today at $169 would have any interest in doing so at $200 (let alone the $300 someone suggested) in a year where sales and revenue will be largely flat-- and FCF will likely be even worse than last years 42% YoY decline.


That's good news I guess for someone sitting on cash who wants to get in cheap for the growth phase kicking back in late 2025 and especially 2026 and on.... it's less good news for anyone holding shares who might want/need to get rid of em anytime soon.

This begs the question how in the world was it $230-$240 just a few weeks ago, and what is keeping it up now from going straight to $100?

 

[khill]

It's only the first leg.
An impulse can be the 1st wave of a bigger impulse or wave A of a zig zag, both of which support a move into the 185-187 area after some consolidation here.
As of this moment, we certainly have a few interesting elements in play.

1. The 171.7 level held, but it's only good for the sequence from 205.6. If this sequence was the entire wave C, good. If it's only wave 1 of C, then caution should be exercised at 185-187 as that'd be the end of wave 2 of C.
2. The weekly bullish divergence is still fully intact. This so far has had a 100% hit rate in predicting bottoms in TSLA.

So, I'm leaning a lot toward 205.6 - 172.42 was the entire wave C.

Given we have breached 171.7 and closed below 170, do you have any thoughts, how low this leg down can go?

 

[Patrick66]

This begs the question how in the world was it $230-$240 just a few weeks ago, and what is keeping it up now from going straight to $100?

Honestly, I think people have a low level of confidence in anything they can postulate positive or negative. The risk if wrong is just too high; one or two minor events and the stock direction changes completely.

If FSD is doomed to forever be L2 then I have no reason to hold the stock. The system just isn't sufficiently more useful than much more basic offerings from competitors to be worth more than $1k. The power consumption of the FSD computer isn't warranted either. The energy business is pretty easy to value and break out. There isn't enough margin there to make it a huge winner either.

But, I view these as low probability scenarios in a 12-month horizon. Outcomes that I view as more likely have a positive impact on the stock and the company.

 

[Knightshade]

This begs the question how in the world was it $230-$240 just a few weeks ago

TBF the single biggest drop in there was $25 in one day from the Q4 earnings call which was pretty awful

and what is keeping it up now from going straight to $100?

Some think the whales who bought in the low 100s aren't going to let it crash a ton further... But I certainly think one could show financial models for EPS for the next 1-2 years that didn't make $100/sh current valuation look insane if that's the length of time you're looking at. Likewise you could do models that go out 5 years and make $169 look quite cheap with a longer term perspective. Hence when people say "priced in" one has to ask what exactly, and to whom?

 

[dl003]

Given we have breached 171.7 and closed below 170, do you have any thoughts, how low this leg down can go?

I dont have an idea at this point. now I mainly wait to see if a lower low on the weekly RSI is registered at EOW. Below 168 is where that can happen.

 

[Cherry Wine]

This begs the question how in the world was it $230-$240 just a few weeks ago, and what is keeping it up now from going straight to $100?

Poor delivery numbers have become increasingly irrefutable as the quarter has gone on (and this despite substantial incentives).

 

[dl003]

This begs the question how in the world was it $230-$240 just a few weeks ago, and what is keeping it up now from going straight to $100?

Thats because Tesla has NEVER been valued at 12 months out. Most people will cite 2-3 year horizon, some 5, a very few even 10. This has an exponential effect that comes in 2 folds:

The first layer is the time horizon. In good times people are willing to look out further. In bad times people suddenly want to go no further than 6-12 months out. For growth companies, going further out means earnings MIGHT grow exponentially and vice versa, and with it net present value.

The second layer is growth rate. The longer the time horizon, the more profound the effect of growth rate on valuation.

In bad times, investors not only shorten their time horizon, but also assign a lower growth rate over that shortened horizon. A double whammy. Since both of these fluctuate in a wide range for a growth ticker like TSLA, its movement aptly reflects this volatility. It doesnt take much more than a few good ER and guidances to skyrocket and vice versa.

 

[khill]

Thank you! What are the entry prices on TSLA that you are looking for?

 

[2Pearls]

Depends who is doing the pricing. There's STILL folks in the other thread sure Troy is clueless on his estimates and Tesla has some magic deliveries rabbit to pull to hit 2.4M or whatever this year. Hopium is a helluva drug. I'd like to say Q1 PD will be a wakeup call, but based on history they'll just find more excuses that aren't Teslas fault and will be sure they'll magically catch up later in the year despite having no plan for how that'd be possible.



So s the current price reasonable?

As a car company, which is still the vast majority of all revenue, PE is still insanely too high at current stock price and vehicle margins and expected sales (esp. once you back out the one-time tax thing from last quarter)--so if you don't expect the financials to reflect being more than a car company this year then it's still going down when they post a terrible PD in a couple weeks and it becomes obvious even 2 million this year will be a stretch and higher is out of the question.

As a car company with an energy business that's starting to become significant you might have a different opinion... energy was only 6% of total revenue in 2023 though, and even Q4 was only up 10% YoY despite the megapack factory outputting. This is the one place there MIGHT be a positive surprise in the Q1 figures-- and again I doubt it'll be anywhere NEAR enough to offset the lack of growth in auto we might at least see energy revenue hit 10% or better of total revenue and maybe convince a few more folks there's more than a car company here and maybe the high PE isn't quite as crazy when if Lathrop is ramping well and we know another such factory is building now in China.


As an "AI" company? Pure and utter fantasy right now. Made worse by the overhang of Elons comp package and his threatening to develop all the cool stuff somewhere else if his demands for 25% of voting control isn't met. Same with robots and self driving*


*RTs aren't happening this year. Nor anything close to em. But it's POSSIBLE we'd see a big improvement in how good an L2 system Tesla offers-- enough that the take rate on FSD, even at L2, improves materially. This, like energy, isn't going to be enough money to get us back to ~30% margins or anything- but it'd be a welcome and positive surprise--- and also bode well for next year when it would get more widely available in the better version in the EU and/or China.

The only remaining chunk of the business is services and other...about 8.5% of revenue in 2023.... Used car prices have continued declining so the previous good news there is gone... Superchargers make a bit, and they're opening up now... but there's so (relatively) few cars who'll be using them in 2024 this isn't likely to be material financially. We MIGHT get a bit of a bump from recognizing deferred FSD revenue from overseas late in the year, but that requires fast moving regulators so good luck and take rate was never high there anyway... so I don't see a big bump here either outside of my maybe-L2-gets-way-better-enough-to-attrack-buyers thought.


So- and again I freely admit this is me just being overly rational about a market that's frequently anything but-- I don't see why anybody who isn't buying TSLA today at $169 would have any interest in doing so at $200 (let alone the $300 someone suggested) in a year where sales and revenue will be largely flat-- and FCF will likely be even worse than last years 42% YoY decline.


That's good news I guess for someone sitting on cash who wants to get in cheap for the growth phase kicking back in late 2025 and especially 2026 and on.... it's less good news for anyone holding shares who might want/need to get rid of em anytime soon.

@Knightshade ... with your last few posts, (and, quite honestly, all your posts) you have given a Master Class in Reality. We can all be Tesla supporters and believers in what Tesla will do in the future and their mission, But reality needs to be spoken (written in this case) and I agree with you 100%. To think that the stock price will magically move higher because sales will increase dramatically or FSD suddenly becomes 100% real in the next few quarters is all hopium. Again, we can continue to be big believers in Tesla and TSLA, but reality and sentiment short term is not so good. People on these forums talk about moderators choice for excellent posts, your last few should be nominated! Thank you.

 

[Max Plaid]

What did you do when it went to $108 last year ...?
It was tough but ultimately good that I held on ... we even saw SP go back to 270 where i was tempted to sell all stocks in personal. Missed by holding on for 4-5 days, because I wanted long term capital gains to kick in around Dec 27th.

Well stupid me bought 9000 TSLA @$300 just before the 3:1 split, on the strong conviction that the stock would pop, of course it did the opposite but I held like a beast all the way down, even acquiring 2800 extra TSLA through assigned puts when it went into free-fall

I even managed to escape the initial reversal, even though I was selling some -cATM's, and traded on the way up very successfully, until May when we got the gap up from 146, then a pull-back, I again had one of my "strong convictions" that this gap would be filled, yolo's on 100x -c150's and the stock went to $165... I then had a decision-point, to let them go or take quite a big loss, but as I had a huge loss on GOOGL calls having over me I decided to sacrifice the shares and with the cash loaded 60 Dec 2025 +c140 and +c200 LEAPS, then again "strongly convinced" the stock would trade sideways for a bit, wrote 100x July -c200's against them, and the stock promptly rallied up to $300

There's a clear pattern of betting the farm on "strong conviction" and being wrong, something I've now addressed with my "burner calls/puts" allowing an escape from any nasty ITM situation on weeklies

And BTW, it was $101.81 in pre-market on 6th Jan 2023...

Thanks. So in this scenario it means for example, selling 37 CCs against the 37 long calls I have, aiming for about $3.50/week ($12,900) which is about $175-$185 strike down here (aiming for $10/week is ATM and kinda risky), and roll up and out if needed. In two months that’ll bring in about $100k if my math is correct. Not bad. That’s in addition to my regular writing safer further out CCs on the rest of my longs (scalping as I’ve been doing). Although with some caution in case we get a strong DCB or other surprise that may run them over (as @dl003 suggested to short down here at our own risk).

Also, is there any “protection” the bought calls are giving me that I am writing against, and what is it?

Having slept on this I thought of a better idea... the only calls you really need to worry about right now are the April & May, forget about the LEAPS, plenty of time to resolve those with weekly shitcalls

So you "could", sell -cATM for the number of weeklies you have, leave the -c open to see if they expire, if they do, use the premiums to close out X number of the weeklies at break-even

Doing it this way you use the LEAPS as "safety" contracts for an escape-roll

If the SP pops, then the long weeklies go back up in value, you roll the short weeklies out

If yous see what I mean...