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Wiki Selling TSLA Options - Be the House

stealthyc

Member
May 22, 2019
387
2,177
MI
I was thinking a little more about this stuff, and I guess I realized that I'm not really as concerned with achieving maximum margin leverage than I am about managing risk. For instance I can sell 10x -685p for next week for a total of 5k premium, vs 17x 655/680 BPS for approximately the same premium. The puts will cost me ~250k margin reservation vs ~47k for the BPS. The puts only exhibit worse loss if the price goes below 635, otherwise they exhibit progressively much less loss as the price gets closer to 685. I could obviously thus sell 5 times as many BPS for the same margin and get 25k premium but my risk goes up to a much higher level than I am comfortable with. That said, I might be more comfortable with BPS if I sell some and manage them and see how it goes, but I'm not as brave as I might want to be right now.
 
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UltradoomY

Member
Supporting Member
Mar 13, 2020
450
2,479
Tampa, FL
I was thinking a little more about this stuff, and I guess I realized that I'm not really as concerned with achieving maximum margin leverage than I am about managing risk. For instance I can sell 10x -685p for next week for a total of 5k premium, vs 17x 655/680 BPS for approximately the same premium. The puts will cost me ~250k margin reservation vs ~47k for the BPS. The puts only exhibit worse loss if the price goes below 635, otherwise they exhibit progressively much less loss as the price gets closer to 685. I could obviously thus sell 5 times as many BPS for the same margin and get 25k premium but my risk goes up to a much higher level than I am comfortable with. That said, I might be more comfortable with BPS if I sell some and manage them and see how it goes, but I'm not as brave as I might want to be right now.
Like all "not advice" in this thread....
I was the same, until I tried it and started small - just one contract - next week I did 5 and forced myself to sell at a position that I would need to roll to understand not just the mechanics but the mental pressure of it.
Worked out well and now I do them regularly and usually have 20 or so open at any one time.
Max loss for the BPS happens when the strike goes below your protective put, so I use $100 spread most times. This also allows me to capture the most premium I can from each spread.
Good luck and cheers!
 

adiggs

Well-Known Member
Supporting Member
Sep 25, 2012
5,255
17,464
Portland, OR
Hm, strange how the SP keeps being knocked back from 720. It can't be the wall of calls there.

Strange. *sips tea*
NOT-ADVICE of course.

But repetitive patterns like that can be tradeable, should you want to put in the effort.

This is the plus side of the significant shorting and manipulative behavior around the share price, plus extensive research and knowledge of the company (information advantage). I figure if I were trading on technical indicators over 00's of underlying, that's not something I would ever be able to take advantage of.

I personally don't trade setups like that - at least not intentionally. I think I've stumbled into it with a sell-into-strength approach and a willingness to be out of the market with my puts or calls for a few days at a time. That's new for me :)
 

adiggs

Well-Known Member
Supporting Member
Sep 25, 2012
5,255
17,464
Portland, OR
I was thinking a little more about this stuff, and I guess I realized that I'm not really as concerned with achieving maximum margin leverage than I am about managing risk. For instance I can sell 10x -685p for next week for a total of 5k premium, vs 17x 655/680 BPS for approximately the same premium. The puts will cost me ~250k margin reservation vs ~47k for the BPS. The puts only exhibit worse loss if the price goes below 635, otherwise they exhibit progressively much less loss as the price gets closer to 685. I could obviously thus sell 5 times as many BPS for the same margin and get 25k premium but my risk goes up to a much higher level than I am comfortable with. That said, I might be more comfortable with BPS if I sell some and manage them and see how it goes, but I'm not as brave as I might want to be right now.
NOT-ADVICE of course :)

As with @UltradoomY and his response, I'm a fan of the larger spread sizes; $100 over $25.

What I learned with personal and painful experience is that with a $25 spread size, the shares can go from max gain (OTM on the short put) to max loss (ITM on the long put) in seemingly a flash. In my case it was a $20 spread size that I finally closed for 40-70% losses (a few different instances, closed at different times). I use the term 'travel' in my mind - as in how much travel do I have between full gain and loss.

I want my BPS to behave much more like short puts and I want to restrain my own tendency to keep getting more and more aggressive as my positions win repeatedly. So far the $100 spread size is doing that for me, though I haven't yet gone ITM and needed to roll these. I'm also trying out a $80 spread size right now, where my hypothesis is that with IV shrinking a smaller spread size will work well. I would expect the corollary to be true - if IV jumped a lot I would probably start going higher than a $100 spread size.

The relationship I have observed - the larger spread sizes provide larger absolute net credits while also providing smaller % net credits relative to the spread size.

IMHO - these spreads should best be viewed and treated as leverage. The margin reservation on a $100 spread size is $10k. I can open 6 of these for the same cash security for a $600 put (on short puts I've restricted myself to positions I can take assignment on in full without taking a margin loan to fund them). That is 6:1 leverage. It might be closer to 3 or 2:1 if I were selling puts on margin.

The point here is that these are all leveraged positions and carry with them the need to treat them with more respect; losses will build faster, just as gains will build faster.
 
NOT-ADVICE of course :)

As with @UltradoomY and his response, I'm a fan of the larger spread sizes; $100 over $25.

What I learned with personal and painful experience is that with a $25 spread size, the shares can go from max gain (OTM on the short put) to max loss (ITM on the long put) in seemingly a flash. In my case it was a $20 spread size that I finally closed for 40-70% losses (a few different instances, closed at different times). I use the term 'travel' in my mind - as in how much travel do I have between full gain and loss.

I want my BPS to behave much more like short puts and I want to restrain my own tendency to keep getting more and more aggressive as my positions win repeatedly. So far the $100 spread size is doing that for me, though I haven't yet gone ITM and needed to roll these. I'm also trying out a $80 spread size right now, where my hypothesis is that with IV shrinking a smaller spread size will work well. I would expect the corollary to be true - if IV jumped a lot I would probably start going higher than a $100 spread size.

The relationship I have observed - the larger spread sizes provide larger absolute net credits while also providing smaller % net credits relative to the spread size.

IMHO - these spreads should best be viewed and treated as leverage. The margin reservation on a $100 spread size is $10k. I can open 6 of these for the same cash security for a $600 put (on short puts I've restricted myself to positions I can take assignment on in full without taking a margin loan to fund them). That is 6:1 leverage. It might be closer to 3 or 2:1 if I were selling puts on margin.

The point here is that these are all leveraged positions and carry with them the need to treat them with more respect; losses will build faster, just as gains will build faster.
Trying to google BPS, what is it short for?
 

adiggs

Well-Known Member
Supporting Member
Sep 25, 2012
5,255
17,464
Portland, OR
Trying to google BPS, what is it short for?
BPS is a Bull Put Spread. When I am spelling it out I call these put credit spreads, vs. put debit spread. The put credit spread is a lower priced long put matched with a higher strike short put. The debit spread is the reverse.
 

CHGolferJim

Active Member
Supporting Member
Jan 28, 2014
1,557
2,081
Chapel Hill, NC
BPS is a Bull Put Spread. When I am spelling it out I call these put credit spreads, vs. put debit spread. The put credit spread is a lower priced long put matched with a higher strike short put. The debit spread is the reverse.
Could we pin a list of key phrases/acronyms to this thread (that we could crowd-source, not asking you to write it)?
 

LN1_Casey

Draco dormiens nunquam titillandus
Supporting Member
Mar 6, 2019
2,055
10,345
Oahu, Hawaii
NOT-ADVICE of course.

But repetitive patterns like that can be tradeable, should you want to put in the effort.

This is the plus side of the significant shorting and manipulative behavior around the share price, plus extensive research and knowledge of the company (information advantage). I figure if I were trading on technical indicators over 00's of underlying, that's not something I would ever be able to take advantage of.

I personally don't trade setups like that - at least not intentionally. I think I've stumbled into it with a sell-into-strength approach and a willingness to be out of the market with my puts or calls for a few days at a time. That's new for me :)

;-) I have a sold call out for 720, so I'm fine.
 
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CHGolferJim

Active Member
Supporting Member
Jan 28, 2014
1,557
2,081
Chapel Hill, NC
Thanks, Jim
That’s what I’ve been doing for a while. I just don’t want to get blasted by a gap up and stuck waiting for two months 🤷
I don't have enough data or experience to definitively answer the question, but my feel is choosing aggressive strike prices on 1-2 week CC, and rolling as needed, is the most lucrative approach. Perhaps go more cautious in times such as these with AI day next Thursday and the possible announcement of a large shares authorization suggesting an impending split, but generally mimic Lycanthrope and others as much as you can stand it. If you have a >$50 gap up once out of 10 weeks, you come out way ahead? That's what I'm trying to do.
 
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ChefBoyardee

Member
Aug 12, 2019
147
1,628
California
NOT-ADVICE of course :)

As with @UltradoomY and his response, I'm a fan of the larger spread sizes; $100 over $25.

What I learned with personal and painful experience is that with a $25 spread size, the shares can go from max gain (OTM on the short put) to max loss (ITM on the long put) in seemingly a flash. In my case it was a $20 spread size that I finally closed for 40-70% losses (a few different instances, closed at different times). I use the term 'travel' in my mind - as in how much travel do I have between full gain and loss.

I want my BPS to behave much more like short puts and I want to restrain my own tendency to keep getting more and more aggressive as my positions win repeatedly. So far the $100 spread size is doing that for me, though I haven't yet gone ITM and needed to roll these. I'm also trying out a $80 spread size right now, where my hypothesis is that with IV shrinking a smaller spread size will work well. I would expect the corollary to be true - if IV jumped a lot I would probably start going higher than a $100 spread size.

The relationship I have observed - the larger spread sizes provide larger absolute net credits while also providing smaller % net credits relative to the spread size.

IMHO - these spreads should best be viewed and treated as leverage. The margin reservation on a $100 spread size is $10k. I can open 6 of these for the same cash security for a $600 put (on short puts I've restricted myself to positions I can take assignment on in full without taking a margin loan to fund them). That is 6:1 leverage. It might be closer to 3 or 2:1 if I were selling puts on margin.

The point here is that these are all leveraged positions and carry with them the need to treat them with more respect; losses will build faster, just as gains will build faster.
Yeah there's a much higher return on the smaller widths but they're way harder to roll for a credit and have a higher breakeven.

I started with $10 wide, but am capping my # of active contracts so as my account grows I'm scaling up by choosing wider strikes which has the effect of reduced risk and lower commissions. Tastytrade had a good segment about this method of scaling
 
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adiggs

Well-Known Member
Supporting Member
Sep 25, 2012
5,255
17,464
Portland, OR
Yeah there's a much higher return on the smaller widths but they're way harder to roll for a credit and have a higher breakeven.

I started with $10 wide, but am capping my # of active contracts so as my account grows I'm scaling up by choosing wider strikes which has the effect of reduced risk and lower commissions. Tastytrade had a good segment about this method of scaling
If you've got a link to that Tastytrade segment, I know that I would find this valuable.
 

JustMe

Active Member
Nov 21, 2016
1,010
11,706
Conroe
Oops, I did it again! 🎶

I was stuck without internet access until noon eastern today and caught the peak of the run up. Perfect timing.

STO 8/20 $740 CC for $9.20
BTC for $7.00

STO 8/20 $740 CC for $7.40
BTC $6.70

I banked $2.90 per share today selling and re-buying covered calls. I’m really happy with that.

-cheers
 

juanmedina

Active Member
Mar 31, 2016
2,569
7,454
SC
Oops, I did it again! 🎶

I was stuck without internet access until noon eastern today and caught the peak of the run up. Perfect timing.

STO 8/20 $740 CC for $9.20
BTC for $7.00

STO 8/20 $740 CC for $7.40
BTC $6.70

I banked $2.90 per share today selling and re-buying covered calls. I’m really happy with that.

-cheers


do you guys don't get ding for day trading? "Pattern Day Trading"
 

juanmedina

Active Member
Mar 31, 2016
2,569
7,454
SC
As long as you have more than $25k in your account, you're king of the universe.

haha. I have no cash everything that I make gets reinvested in shares. I trade through 4 IRA's and my after tax. I guess I will have to build some cash reserves because I see some opportunity on day trading options.
 

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