I wonder just how much premium you would need to make a short strangle a smart move. I've done them before, but not intentionally-- open one leg and after sufficient movement OTM open the other leg. Sometimes it just isn't logical to close them
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
SpaceXaddict
Member
Thanks for responding. Let me explain my thinking. I'm short calls, and they are ITM. If Tesla rallies, then they go deeper in the money, making management harder. But by flipping one contract to a comparable put... in case of a rally that put will decrease in value. Delta in the money approaches 1.
The calls then increase in value... but that means calls closer to the put also increase in value. So I then STC the short put and STO a short call, at a higher strike.
I have now successfully converted one of my short calls into a much closer to the money short call. One that is likely higher than my cost basis.
I am trying to figure this out as I go. I haven't been in this position before. I could just BTC the calls and eat $12k in losses, but I have already gotten that down to half the contracts I started with, and every trade has been at a net credit.
I have 6 months of time left to manage the position, and I am hoping to get the strikes into prices I actually like, or maybe even turn it into a short strangle.
That's assuming TSLA bounces around between the strikes. If it takes off to the moon (my fear) then it will outrun the put and it will expire, or be cheap to close. If it crashes really low, then the calls may expire worthless.
This way, any move toward one of the strikes helps me. And if it doesn't move much at all, then I just get that theta trickle. But that would be bad because it doesn't give me much to work with for improving strikes.
Hope this makes sense. Please feel free to tell me if I'm missing something, but if you do, assume I'm a bit dumber than average here... a lot of the posts here seem to assume a lot of shared knowledge.
SpaceXaddict
Member
SpaceXaddict
Member
Normal strangles look nice because you set the strikes outside the expected move range, and then as the stock moves you can roll up the furthest side and collect premium.
My situation is different, as it's a reverse strangle (or "Short guts"). But I am thinking it has a similar feature for rolling, only instead of rolling the opposite leg of the direction of the price move, you adjust the leg that the price went towards. And instead of rolling it deeper in the money, you flip it to a call that is closer to the money, resulting in an improvement in your overall call positioning. Do this enough times with the stock going up and down and you should be able to fix both legs.
It's not about premium, it's about managing a position where the stock moved dramatically and my calls are deep in the money.
Is the put cash-secured? Do you have more cash or share lots to work with? Are you willing to sell the shares at 155 under any circumstance? Or looking to accumulate for the long-term?
SpaceXaddict
Member
Puts are cash secured. I have more share lots, and plan to deposit more cash in the near future, enough for another contract. I am willing to sell at $155 if I have to. But I would prefer to accumulate more shares long term.
I have been managing by rolling out and deeper in the money to reduce number of calls I'm short, and then back to earlier expiration by selling an ITM short put. So now I have half as many shares at risk, and I can manage for either direction that the stock moves.
One of the reasons I am comfortable selling these DITM puts is that I'm bullish long term and if they get executed I get shares-- and since I got intrinsic value plus premium at the time I sold them, it's roughly equivalent to having bought a bit under the current share price at the time the contract was sold.
Like, buy TSLA at $5 under the today's price? Why not!
If I had in fact just bought TSLA today instead of selling the put, I would have held it though the period of the contracts expiration anyway, even if TSLA crashed down to $100. (In fact I would be buying as much as I can at that point.). I will be accumulating more shares over the next 2 years regardless of the price.
I managed my way into this by trying to fix a bad trade and am really trying to learn how to manage contracts when things go against you... this is practice for me.
I'm not saying anyone should ever open by selling short guts!
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If you have extra cash and aren’t scared of a little downside, there’s a few things you could do to dig yourself out.
Right now, your 240p is too far OTM to get anywhere unless the SP moves up a lot. Since you want to accumulate anyway, you could bring the strike down by doubling or even tripling the contracts: 1x 1/25 -p240 -> 2x 1/25 -p195 (or maybe 3x 12/24 -p180).
You could also buy shares or LEAPS to cover your 155s as you roll them indefinitely waiting for a pull back, and if they do exercise you can just let them go. Or buy shares/LEAPS and then double your 1/25 -c155 to 2x 12/24 190c. Pair that with -p180 from the paragraph above and your strangle is uninverted.
Or just flip the calls to puts if you want to accumulate and not lose shares.
I think you need to carefully draw a payout diagram of this; in almost all cases I can come up with you just increase risk/exposure. It might also help to insert theoretical prices and strikes for what you are thinking.
i am bullish nvda bearish smci
thenewguy1979
"The" Dog
I think the rift between dell and NVDA ERs is starting to showed a potential divergent between the shovel seller and the guys wrapping the shovels. My egg on NVDA for next week recovery.
For TSLA just some more news on lawsuit of Elon stock selling and the recalls. More downward as I can see.
Thank you for the detailed response! As for my handle, it was intended as a pun but has backfired. When I first joined TMC I was just learning about TSLA and EVs; I was interested in everything. I also dabbled in options, so I thought it was cute. Today, I still only occasionally buy calls, but know very little about options trading.
Over $185 to lower chance of breakdown.
Otherwise $159 is calling
Otherwise $159 is calling
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I think both of those are just noise. The downside will come when the press starts projecting Q2 P&D. Inventory seems way down, but production hasn't really picked back up the way I had expected (in Austin). I think Tesla overcorrected. I see us up on Monday with a drop mid-week... but it is not much better than a coin toss.
Bollinger Bands width is at it's most narrow in history. Top 5%’ish in history.
(Credit: Heisenberg)
(Credit: Heisenberg)
EVNow
Well-Known Member
I’d not say I was a former member of “MM” - I did work in the IT department of a mega bank and the notion that they would interfere in the working of the market making application boggles my mind.
This is a conspiracy theory that has zero validity. As has been shown in this thread, starting price on Friday has better correlation to ending price than max pain !
What took so long?
Tesla CEO Elon Musk was accused of insider trading in a lawsuit filed Thursday by a Tesla shareholder in Delaware Chancery Court.
Shareholder Michael Perry claims in the filing that Musk sold over $7.5 billion of shares of his electric car company in late 2022 before potentially disappointing production and delivery numbers were made public.
Perry said Tesla's stock took a nose dive after the company's fourth-quarter numbers went public on Jan. 2, 2023, and claimed that Musk "improperly benefited" by about $3 billion in insider profits.
"Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla," the lawsuit said, per Reuters. Perry asks the court to instruct Musk to return the profits he made from the trades.
The lawsuit says Musk sold the shares on various dates in November 2022 and December 2022.
Perry also accused Tesla's directors of breaching their fiduciary duty by allowing Musk to sell the shares.
Musk and Tesla did not immediately respond to Fox Business' request for comment.
The lawsuit alleges that Musk, who in 2022 said demand for Tesla vehicles was "excellent," learned about the underwhelming production and delivery numbers in mid-November via his access to real-time data, and sold his shares before the information went public.
When Tesla announced it would discount vehicle prices and released the data in January, analysts raised concerns that the company's cars weren't in demand, and Tesla's stock price dropped.
"Had (Musk) waited to make these sales until after the release of material adverse news ... his sales would have netted him less than 55% of the amounts realized from his November and December 2022 sales," the lawsuit said.
The lawsuit comes as Musk has urged Tesla shareholders to vote to reinstate his $56 billion pay package after a Delaware judge struck it down in January.
The judge ruled that Tesla's board of directors didn't adequately disclose their personal ties to Musk and that the company was on pace to meet most of the plan's benchmarks. Due to the lack of those disclosures to shareholders, the compensation plan's excessive size resulted in it being voided by the judge.
Musk responded to the ruling by pushing for Tesla to change its state of incorporation from Delaware to Texas, which is another item that is being presented to shareholders for them to vote on at the annual meeting.
Musk also faces a Securities and Exchange Commission (SEC) probe into his 2022 acquisition of Twitter, the social media platform he rebranded as X. Musk has said the SEC is trying to "harass" him with undeserved investigations.
A separate shareholder lawsuit has accused Musk of defrauding X investors by delaying disclosure of his stake in the social media company to amass shares at lower prices.
Reuters contributed to this report.
Elon Musk accused of $7.5 billion insider trading in lawsuit from Tesla shareholder
A Tesla shareholder claims Musk used inside information to offload Tesla stock before prices dropped
June 1, 2024 7:19am EDTTesla CEO Elon Musk was accused of insider trading in a lawsuit filed Thursday by a Tesla shareholder in Delaware Chancery Court.
Shareholder Michael Perry claims in the filing that Musk sold over $7.5 billion of shares of his electric car company in late 2022 before potentially disappointing production and delivery numbers were made public.
Perry said Tesla's stock took a nose dive after the company's fourth-quarter numbers went public on Jan. 2, 2023, and claimed that Musk "improperly benefited" by about $3 billion in insider profits.
"Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla," the lawsuit said, per Reuters. Perry asks the court to instruct Musk to return the profits he made from the trades.
The lawsuit says Musk sold the shares on various dates in November 2022 and December 2022.
Perry also accused Tesla's directors of breaching their fiduciary duty by allowing Musk to sell the shares.
Musk and Tesla did not immediately respond to Fox Business' request for comment.
The lawsuit alleges that Musk, who in 2022 said demand for Tesla vehicles was "excellent," learned about the underwhelming production and delivery numbers in mid-November via his access to real-time data, and sold his shares before the information went public.
When Tesla announced it would discount vehicle prices and released the data in January, analysts raised concerns that the company's cars weren't in demand, and Tesla's stock price dropped.
"Had (Musk) waited to make these sales until after the release of material adverse news ... his sales would have netted him less than 55% of the amounts realized from his November and December 2022 sales," the lawsuit said.
The lawsuit comes as Musk has urged Tesla shareholders to vote to reinstate his $56 billion pay package after a Delaware judge struck it down in January.
The judge ruled that Tesla's board of directors didn't adequately disclose their personal ties to Musk and that the company was on pace to meet most of the plan's benchmarks. Due to the lack of those disclosures to shareholders, the compensation plan's excessive size resulted in it being voided by the judge.
Musk responded to the ruling by pushing for Tesla to change its state of incorporation from Delaware to Texas, which is another item that is being presented to shareholders for them to vote on at the annual meeting.
Musk also faces a Securities and Exchange Commission (SEC) probe into his 2022 acquisition of Twitter, the social media platform he rebranded as X. Musk has said the SEC is trying to "harass" him with undeserved investigations.
A separate shareholder lawsuit has accused Musk of defrauding X investors by delaying disclosure of his stake in the social media company to amass shares at lower prices.
Reuters contributed to this report.
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