Wiki Selling TSLA Options - Be the House

[ZeApelido]

Not TSLA but..

I bought $20k of HOOD on Monday and now it's up almost 2x.

So for fun since volatility is high I sold covered calls on the shares for 1 month out at $70 strike to net a premium that basically recovers my initial purchase price. So if it get's assigned, I'm still up almost 3x in a month. If the stock tanks to 0, I still came out breakeven.

Missing the upside in the next month, but I think that's a pretty good deal, what do you think?

 

[stealthyc]

Adding on to @Buckminster 's response.

When you purchase the 1000 strike call, you are purchasing the right to purchase 100 shares at $1000 at some point in the future up to the expiration date. But you have also just purchased an asset, so you also have the choice of simply selling the asset. The original transaction is a BTO (buy to open) and the closing transaction would be STC (sell to close).

In practice most options are sold rather than exercised. The value is the same either way (assuming immediate sale at the share price at that point). My understanding of tax consequences in brokerage accounts, US taxes, is that a purchased call held for >12 months will qualify for long term capital gains. I don't know if exercise resets the clock on long term capital gains or not (see a tax pro on that).

The downside to an early exercise from your point of view is that whatever time value is in the option at that point, you just gave it away to whoever gets assigned. There's no time value when you allow the option to go all the way to expiration and buy the shares at that point - you've allowed all of it to tick away. This is an important reason why many purchasers of long dated options will STC the option with ~3 months to expiration. There will still be as significant amount of the original time value remaining at that point (around 1/2 if the shares haven't gone anywhere is about what I've seen in my research), so an early STC cuts down on your cost to enter the position pretty significantly.

In the US, exercising DOES reset the clock.

 

[juanmedina]

Not TSLA but..

I bought $20k of HOOD on Monday and now it's up almost 2x.

So for fun since volatility is high I sold covered calls on the shares for 1 month out at $70 strike to net a premium that basically recovers my initial purchase price. So if it get's assigned, I'm still up almost 3x in a month. If the stock tanks to 0, I still came out breakeven.

Missing the upside in the next month, but I think that's a pretty good deal, what do you think?

why you didn't tell us on Monday?

 

[JustMe]

For those new to options, I recommend checking out the YouTube channel InTheMoney.
Clear explanations and focused videos…

https://youtube.com/channel/UCfMiRVQJuTj3NpZZP1tKShQ

 

[ammulder]

Well, I got overeager and sold 710 and 720 calls on the Monday rise. Today I ‘rolled’ 710 to 720 giving a few bucks back (still for this Friday expiration). So I’m cheering for the MMs to hold the line at the moment, and will be looking to close those out tomorrow or early Friday. Not much confidence “they” can keep it under 720 all the way to the bitter end, but I guess we’ll see what the macros deliver.

 

[Drezil]

In practice most options are sold rather than exercised. The value is the same either way (assuming immediate sale at the share price at that point). My understanding of tax consequences in brokerage accounts, US taxes, is that a purchased call held for >12 months will qualify for long term capital gains. I don't know if exercise resets the clock on long term capital gains or not (see a tax pro on that).

On the tax-thing: it is VERY country specific. So a "general" warning for non-US-guys here:

In germany there is a distinction between shares & derivatives. A call-option is a derivative. But if you exercise you turn it into shares.
Here the "cost" of the call option is added to the strike of the exercise as new "base price" for the shares.

You can offset share gains only with share losses & derivative gains mostly only with derivative losses (and a bit more specifics that enable $things).

So if you exercise early you shift your gains/losses from the one bucket (derivatives) to the other (shares). If you just sell the call they stay in its bucket.

Also we have no wash-sales & no short-term/long-term distinction.

So better get onto reading legal code for a specific country or ask an expert. In Taxes there is no "rule of thumb" for different countries

 

[Drezil]

This advice always stuck with me about buying calls. I lost the original source, but I just pulled it from my notes document:

Buying call options with the goal of owning the stock when the options expire is counterproductive. You buy call options to make money when the stock price rises. If your call options expire in the money, you end up paying a higher price to purchase the stock than what you would have paid if you had bought the stock outright.

Only correct IF you have the money to buy.
Call-Options can give you leverage & way higher return on used capital if the stock moves in your direction.

If you have the money, then buying stock & selling covered calls is the better way. But most of the calls are "shitcalls" like 800 for 8/20 hoping for a 20% rise after 8/19 or something They only cost 10k or so & if they blow up they can get you an easy tenbagger.

If you want to own stock cheap then one should better sell ATM weekly puts & get paid for buying the stock

 

[Drezil]

For those new to options, I recommend checking out the YouTube channel InTheMoney.
Clear explanations and focused videos…

https://youtube.com/channel/UCfMiRVQJuTj3NpZZP1tKShQ

Also: Mike & his Whiteboard

121 videos from basics to near expert.

 

[corduroy]

Playing "the funnel". Just sold new $750 -Cs for $1.25 for Friday, after closing my previous -Cs yesterday 92% profit.

 

[juanmedina]

Playing "the funnel". Just sold new $750 -Cs for $1.25 for Friday, after closing my previous -Cs yesterday 92% profit.

I sold a few $755cc's for $1 and already at 50% profit... I was really hoping to the stock to take off.

 

[stealthyc]

IV is at a yearly low, makes me sad.

 

[Yoona]

IV is at a yearly low, makes me sad.

(not advice by rookie) This looks to me like a good time to open an IC for 8/6; IV is not trending, SP move is not fast, and range is tight. I would leave room for downside movement and use IV/delta to determine range (not SP).

 

[stealthyc]

I will likely do my usual thing which is to sell some puts tomorrow near end of day for next week. This past week was very lucrative, but might need to be a little more conservative for next week.

 

[Drezil]

IV is at a yearly low, makes me sad.

IV always depends on time of the option and roughly the time-to-expiration * 2 (making "today" the middle & half revealed).

Green is friday, yellow is 20/8, blue is dec.
if the SP trends up slowly(!), then IV will drop slightly on the longer-dated options. For dec expiration this will continue well into the 800s.
Why? Because in the last half year we dropped from 900->600, so a rise up to 850 will LOWER the 12-month volatility as we get more "in the middle" of both extremes of 900/600.

You can also see the volatility-behaviour into expiry here. The corridor gets very narrow with steep edges, but the lowest point continues to sink until we have certainty at expiration.

That is also why opening short positions (CC & CSP) is great if the price just ricochet up/down as vega massively increased the time value.

Back in the days we had IV > 100% .. that was a great time to sell premiums.. :/

 

[ReddyLeaf]

Very good week so far, skipping close to the ATM edge for me.

Monday during the AM runout:
STO 8/06 c755@$6.00
BTC 8/06 p650@$1.25 -> STO 8/06 p697.50$6.00
BTC 8/06 p680@$3.20 -> STO 8/06 p700$7.20

Tuesday:
BTC 8/06 c755@$1.20 (wow $4.80 in one day!)

SNAFU Wednesday (12:30 EDT, near daily low):
BTC 8/06 c685@$28.00 -> STO 8/13 c690@$29.50 (ok)
BTC 8/13 c690@$29.30 (Mistake. Meant to BTC a 2nd 8/06)
Got nervous about Reg T (or whatever it’s called) violation, so just sold shares of TSLA to raise enough cash to BTC everything in that account. So, will be booking a $29/sh loss on that account, but at least I have my shares back and I won’t need to roll DITM calls.

Thursday:
BTC 8/06 p697.50@$1.00 -> STO 8/06 p710@$3.20
BTC 8/06 p700$1.30 -> STO 8/13 p700@$9.20
STO 8/06 c740@$1.12 (should have just left the c755s open)

Friday:
Based on MaxPain guesses, targeting a close around $710-$715, but if wrong will just roll to next week (though I might allow the p710s to be exercised and take the shares).

 

[Discoducky]

Max pain looking more like 760 next week due to the call wall. I'm placing bets based on that.

 

[AxlxA]

Max pain looking more like 760 next week due to the call wall. I'm placing bets based on that.

Maybe I should buy back my $700C I have open for tmrw from a roll last week. Was planning on assignment and sell $700P

 

[Chenkers]

Max pain looking more like 760 next week due to the call wall. I'm placing bets based on that.

Current notional max pain for next week is $700 but based on the chart it would be more like $710-715. This would be expected to move up through next week but the massive call wall at $750 doesn't look to be going anywhere. Real max pain will always be below this call wall and based on the calls/puts and expected drift up, I'd currently expect a close somewhere $720-735. Next week is looking ideal to sell an early IC with the strong Put/Call walls at $700/$750. Possibly multiple 670/695 755/780 that currently gets around $7 for $2,500 maintenance margin each, but I may still wait till early next week.

 

[ReddyLeaf]

Max pain looking more like 760 next week due to the call wall. I'm placing bets based on that.

As always, everyone should make their own decisions, but I like your thinking here. I’m not selling calls until next week, but I will be watching the 750-755-760 line very closely on Monday. Definitely don’t want to be below that 750 wall.

 

[jaspa]

Long time lurker in this thread, finally decided to register for an account and make it official! Wanted to pose a question to the knowledgeable members in this group. For background, my option experience has been mostly on the put selling side. During the drop at the end of Feb, I got the "smart" idea to buy a call (first call too ) thinking the drop might be temporary in nature. Picked up 1/21/22 expiry, $800 strike for ~$168. Have held it and it's worth ~$68 now.

Does anyone have advice not advice on how they would approach this situation? I'm bullish on Q3/4, but with ~5 months to expiry, time decay will really start to work against me. I was considering rolling up strike to get some theta, or maybe a bull call spread to be able to roll out the furthest? Call is currently sitting in an IRA so this might limit my overall options. Still learning and chalking this up as a newbie move.