Wiki Selling TSLA Options - Be the House

[Discoducky]

9/17 is a monthly expiration date - contracts have been available for much longer. The OI interest in weeklies doesn't really pick up until that week.

EDIT: Actually, I think 9/17 is a LEAP expiration date, which would explain it much better than just a monthly. (For instance, 9/16/22s are available right now, etc.)

Is there a way to verify if it is a LEAP expiry? Sorry, I don't know how to do that. Quick search yielded nothing, hoping brighter minds may know.

 

[ammulder]

So, do you folks selling 9/3 calls today not think the stock is going to pop on Monday? I'm sort of assuming I'd do better to sell during a pop Monday than during the end-of-week suppression today. (Or are you saving to potentially sell more on Monday as well?)

 

[Yoona]

Would love to hear people's input on:
- what's your weekly % gain ? (in relation to TSLA holding or account balance - no detailed numbers required)
- what's your weekly % gain goal? How often do you hit or miss it?
- what's the strat you generally use (of course most will do X when stock is high, Y when stock is low, etc. A mix is indeed the most fitting IMO).

My % gain last 11 weeks, including this week:

Below is my first 9 months of options trading, with 2 days left in Aug. First month was learning the ropes. The Apr disaster is a 'reboot' - i decided to BTC everything and start fresh positions. The Jun fail is becoz i got too ATM aggressive.

I am up 16 out of the last 18 weeks. This happened when i focused on 3 rules "don't be greedy, don't take unnecessary risks, make sure there is enough unused margin room". Still 2 fails and i need to understand theta/iv more.

Overall strategy is to have my positions 1-3 weeks out. Nothing for current week. If there is anything for current week, it is for top-up (ie open BPS/BCS/IC once closing sp is pretty much obvious). I open IC legs separately now instead of 1-click laziness. I roll BPS on Thursday dips while looking for fast movements (prem during quick morning dip is better than during afternoon slow dip).

My SHOP -p experiment went well and it's closed. Overall $3k gain and less margin usage so i might try it again.

 

[Cherry Wine]

Is there a way to verify if it is a LEAP expiry? Sorry, I don't know how to do that. Quick search yielded nothing, hoping brighter minds may know.

Not that I know of off-hand. Occam's razor is good enough for me though.

 

[AquaY]

So, do you folks selling 9/3 calls today not think the stock is going to pop on Monday? I'm sort of assuming I'd do better to sell during a pop Monday than during the end-of-week suppression today. (Or are you saving to potentially sell more on Monday as well?)

Good question.

 

[pz1975]

My current weekly gain is around 3-5% against total account capital/liquidity but was less before I got things properly worked out. I have achieved 7% but that was pushing it or just a crazy week to trade. My target is 5% and I see this being achievable unless I hit a bad week and then need a recovery week. I could achieve more if I didn't have mostly shares in the accounts as only about 1/3 of the share value gets released as excess liquidity that I can actually trade against.

I've recently started an experiment with a couple of my sons, one through my account (shadow accounting) and one through his own new account. Taking one for example, he started with around $5k excess liquidity, and is using half that amount as the margin limit to sell options against each week. So far this is yielding weekly option premiums of $4.25-$6, so say around 10%. At first this only allows for one contract per week but will build into additional contracts as the capital compounds. If we can keep this up for a year, then I won't have my kids coming to me asking for money.

Edit: Added graph for the last month for my main account:

View attachment 702083

I’m genuinely curious how you it is possible generate 3-5% every week selling calls and puts.

For example someone has 5,000 shares ($3.5 million). The most covered calls they can sell at a time is 50 and the most puts they can sell is 15 or so (more if doing BPS of course). To earn 5% of $3.5 million ($175K), they would have to be selling weekly calls with a premium of like $25 and puts $30. These are just rough examples of course. The only way to get anywhere close to those premiums for weeklies is to sell ITM options, which of course will not generate much profit most of the time.

I’m not saying I don’t believe you - more that I must be missing some sort of crazy clever profit generator I’d like to learn about.

In comparison, I use a pretty safe strategy (don’t use all my margin and don’t sell calls against more than half of my calls/LEAPS) and am happy to generate 0.2% per week.

 

[ammulder]

Is there a way to verify if it is a LEAP expiry? Sorry, I don't know how to do that. Quick search yielded nothing, hoping brighter minds may know.

In "Power E*Trade" the monthly expiry dates are labeled differently (e.g. "Sep21" instead of "Sep-17-21" as it would be formatted if weekly). Then if you scroll farther out you see the LEAP months are Jan-Mar-Jun-Sep... so I would assume that the monthly closing date for any of those four months is when LEAPs expire.

 

[CHGolferJim]

A few thoughts on Max Pain for the upcoming weeks.

9/3 - 675
9/10 - 700
9/17 - 640
9/24 - 700

I know these are subject to change closer to the date, but next week's MP has decreased since yesterday, and I'm not thrilled about it. The monthly expiration date makes sense to me being lower, but next week going down instead of up strikes me as odd. Jitters from yesterday's decline?

Also, here's my Max Pain call/put spread for today. Looks like 700-702 is actually the most advantageous for the MMs this week (calls left, puts right, rightmost column is OI calls - OI puts):

31.5	0	-	9,308	2,592	670	0.67	0	-	10,135	9,576		-6,984​
25.45	0	-	753	1852	675	0.74	0	-	8,123	6,645		-4,793​
21.9	0	-	15,634	7,624	680	0.91	0	-	15,406	12,577		-4,953​
17.25	0	-	433	2,891	685	1.24	0	-	8,545	3,461		-570​
12.86	0	-	4,146	3604	690	1.7	0	-	18,749	5,203		-1,599​
8.95	0	-	2,109	2,519	695	2.7	0	-	8,448	4,975		-2,456​
7.25	0	-	2,906	1,897	697.5	3.45	0	-	6,123	1,939		-42​
5.6	0	-	29,194	12,878	700	4.4	0	-	54,947	13,280		-402​
4.25	0	-	9,531	3,197	702.5	5.45	0	-	7,764	1,477		1,720​
3.22	0	-	27,851	4138	705	7.01	0	-	28,896	2,376		1,762​
2.38	0	-	14,472	3,883	707.5	8.55	0	-	6,499	965		2,918​
1.74	0	-	54,460	13326	710	10.5	0	-	30,876	5,157		8,169​
1.27	0	-	13,841	2926	712.5	12.6	0	-	5,123	1,272		1,654​
0.9	0	-	34,393	7281	715	14.8	0	-	4,372	1,507		5,774​
0.62	0	-	5,159	2,338	717.5	17.75	0	-	1,127	656		1,682​
0.49	0	-	45,507	12115	720	19.3	0	-	2,158	4,637		7,478​
0.29	0	-	20,472	9101	725	24.22	0	-	819	426		8,675​
0.2	0	-	29,954	13612	730	29.28	0	-	786	1,140		12,472​

Interesting comments. I’d like to see some graphs on daily Max Pain figures for a bunch of dates going back 3 weeks prior to the date to see how it tracks vs. eventual closing price. Maybe I can get around to compiling some data.

As for my strategy and returns targets, there’s a lot of explanation in prior posts above, but I own shares and long-term LEAPS for which I don’t have specific appreciation targets, just let them ride, and sell covered calls primarily weeklies for income. Targets for that are 2%/month at current price levels, and I’m not sure if that will hold as the shares rise, I mostly have a $/month and $/year target in mind. Haven’t decided if I’ll get more cautious as shares rise, whether choosing to or being forced to, and whether I’ll pare back total shares exposure at higher SP.

 

[Yoona]

Interesting comments. I’d like to see some graphs on daily Max Pain figures for a bunch of dates going back 3 weeks prior to the date to see how it tracks vs. eventual closing price. Maybe I can get around to compiling some data.

Options Max Pain - Calculations for SPY

Our Max Pain calculator displays the aggregate nominal value of options premium expiring at each strike price, for each expiration.

swaggystocks.com

 

[stealthyc]

I’m genuinely curious how you it is possible generate 3-5% every week selling calls and puts.

For example someone has 5,000 shares ($3.5 million). The most covered calls they can sell at a time is 50 and the most puts they can sell is 15 or so (more if doing BPS of course). To earn 5% of $3.5 million ($175K), they would have to be selling weekly calls with a premium of like $25 and puts $30. These are just rough examples of course. The only way to get anywhere close to those premiums for weeklies is to sell ITM options, which of course will not generate much profit most of the time.

I’m not saying I don’t believe you - more that I must be missing some sort of crazy clever profit generator I’d like to learn about.

In comparison, I use a pretty safe strategy (don’t use all my margin and don’t sell calls against more than half of my calls/LEAPS) and am happy to generate 0.2% per week.

I think it's all about the spreads. They both (call and put) can just use margin as collateral, so you are not restricted on the call side by number of shares, and you can get a ton of leverage if you like.

 

[Chenkers]

I’m genuinely curious how you it is possible generate 3-5% every week selling calls and puts.

For example someone has 5,000 shares ($3.5 million). The most covered calls they can sell at a time is 50 and the most puts they can sell is 15 or so (more if doing BPS of course). To earn 5% of $3.5 million ($175K), they would have to be selling weekly calls with a premium of like $25 and puts $30. These are just rough examples of course. The only way to get anywhere close to those premiums for weeklies is to sell ITM options, which of course will not generate much profit most of the time.

I’m not saying I don’t believe you - more that I must be missing some sort of crazy clever profit generator I’d like to learn about.

In comparison, I use a pretty safe strategy (don’t use all my margin and don’t sell calls against more than half of my calls/LEAPS) and am happy to generate 0.2% per week.

I've detailed what I'm doing here a few times but most of it is selling IC's against maintenance margin excess liquidity. I do sell CC, BPS and BCS but the vast majority of premiums come from IC's. I have less total shares than your example above but for example this week I've sold the following options across my two accounts:

351 x 650/670 720/740(or 770) IC for total premiums of $160,175
65 x 720/740 BCS for total premiums of $21,250
20 x CC for total premiums of $9,950
Total premiums this week: $191,375

I know it sounds crazy, it does to me, but it is what it is. At the moment I'm just testing things out before I retire and start shifting a lot of cash from Wall St to more deserving non-profits and charities.

 

[adiggs]

Does anyone know of software to do back testing on? (Does TOS do it?) I want to backtest 2000-2002 on spy what some of us are doing on tsla now to see how it turns out. And by that I mean ~50% shares, 50% DITM LEAP calls, selling weekly calls against all of those and selling put spreads with 20-40% of the margin.

I chose this time frame because I figure that is about as bad as it could get.

I have a subscription to Automated Stock & Options Backtesting Software.

I don't have opinions or comparisons to other tools. I know that this one seems like a pretty robust tool that will need more work to get a trading strategy implemented. Lots of options for the construction of the strategy - I'm still getting mine implemented so that I can backtest over the last 8 years.

 

[Chenkers]

Having laid all that out, I do have a worry about what happens if a lot of us start doing this regularly. For example I've currently sold 3.6% of the $720 call open interest expiring today. We generally assume that it is the MM doing most of the call selling and that they manipulate the stock to their advantage. However it wouldn't take that many people doing what I'm doing before the MM are in the minority for sold options at certain strikes. What happens if they become aware of that? Do they then start manipulating in the opposite direction and this whole strategy falls apart??

 

[PastorDave]

Having laid all that out, I do have a worry about what happens if a lot of us start doing this regularly. For example I've currently sold 3.6% of the $720 call open interest expiring today. We generally assume that it is the MM doing most of the call selling and that they manipulate the stock to their advantage. However it wouldn't take that many people doing what I'm doing before the MM are in the minority for sold options at certain strikes. What happens if they become aware of that? Do they then start manipulating in the opposite direction and this whole strategy falls apart??

Another theory is that WE are the ones causing the SP behavior we've ascribing to the MMs. I don't understand this 100%, but here's what I can share off the top of my head.

The theory goes like this; MMs delta hedge when we buy or sell an option. So if a trader purchases a 720c, then the MM buys a certain amount of stock (say 50 shares) to hedge against that trade so that it is delta neutral for the MM. So if the stock price goes up or down, it doesn't matter to the MM. Now when the original trader closes that position, the MM would sell that hedged stock to remain delta neutral on the trade.

This has an effect on the stock that I've heard called pegging. So let's say that most "smart" retail traders have the same info we do, and assumed this past week that it was unlikely the stock price would rise past 720 due to the massive call wall there. That would mean that there are a ton of people waiting for the SP to approach 720 to open short call positions. When this happens, it causes the MMs to divest stock to be delta neutral, which causes the stock to hit a wall as it approaches 720. I think some version of this is plausible.

The hole in this theory for me is the capping (placing then retracting large sell orders) that's been reported in the main forum. Perhaps not all of the MMs delta hedge?

 

[AquaY]

I've detailed what I'm doing here a few times but most of it is selling IC's against maintenance margin excess liquidity. I do sell CC, BPS and BCS but the vast majority of premiums come from IC's. I have less total shares than your example above but for example this week I've sold the following options across my two accounts:

351 x 650/670 720/740(or 770) IC for total premiums of $160,175
65 x 720/740 BCS for total premiums of $21,250
20 x CC for total premiums of $9,950
Total premiums this week: $191,375

I know it sounds crazy, it does to me, but it is what it is. At the moment I'm just testing things out before I retire and start shifting a lot of cash from Wall St to more deserving non-profits and charities.

Is that USD or AUD?
I thought I had a great month and it isn't even equal to your week.

 

[pz1975]

I've detailed what I'm doing here a few times but most of it is selling IC's against maintenance margin excess liquidity. I do sell CC, BPS and BCS but the vast majority of premiums come from IC's. I have less total shares than your example above but for example this week I've sold the following options across my two accounts:

351 x 650/670 720/740(or 770) IC for total premiums of $160,175
65 x 720/740 BCS for total premiums of $21,250
20 x CC for total premiums of $9,950
Total premiums this week: $191,375

I know it sounds crazy, it does to me, but it is what it is. At the moment I'm just testing things out before I retire and start shifting a lot of cash from Wall St to more deserving non-profits and charities.

Thank you for your response. How much margin does the IC use vs. a BPS? How do the two legs of the IC balance each other off (since they both can’t end up as losing positions) to reduce margin relative to each leg individually? In your first example (650/670 and 720/740), each of those separately should tie up $20 of “margin” each for $40 total (ignoring covered calls and % margin requirements). How much does having them together in an IC reduce the margin needs? Maybe it’s $20 since that is the maximum loss.

I haven’t done spreads/IC’s yet because my online platform doesn’t allow it. I have to phone a broker to do them and I am too busy/lazy to do that so far. I have only been doing naked put sales and covered calls so far but your results are very impressive so it is probably worth it.

My concern with doing your strategy would be when (not if) TSLA makes a big move you would be looking at a massive loss (like $700K in your first example). WhT would your strategy be to roll the losing leg? Wait until close to expiry or do it early before the loss gets too big?

 

[dl003]

Well, regarding the impact of retails selling calls, months back, I read a press release from IBKR. It basically said that, for the first time in its history, IBKR's clients were net short: short calls with negative delta in excess of long stock positions. I don't know what to make of that.

 

[stealthyc]

Thank you for your response. How much margin does the IC use vs. a BPS? How do the two legs of the IC balance each other off (since they both can’t end up as losing positions) to reduce margin relative to each leg individually? In your first example (650/670 and 720/740), each of those separately should tie up $20 of “margin” each for $40 total (ignoring covered calls and % margin requirements). How much does having them together in an IC reduce the margin needs? Maybe it’s $20 since that is the maximum loss.

I haven’t done spreads/IC’s yet because my online platform doesn’t allow it. I have to phone a broker to do them and I am too busy/lazy to do that so far. I have only been doing naked put sales and covered calls so far but your results are very impressive so it is probably worth it.

My concern with doing your strategy would be when (not if) TSLA makes a big move you would be looking at a massive loss (like $700K in your first example). WhT would your strategy be to roll the losing leg? Wait until close to expiry or do it early before the loss gets too big?

I plugged the 351 IC in, and at current prices it's about 1:2 reward to risk ratio. ~228k credit for ~477k max loss (which is also the margin reservation). Because of the tight spreads a straight roll would have to be done very quickly before it could only be done for a debit, but you can also roll with a spread expansion which adds risk but gets you credit.

 

[Tslynk67]

Tri

I'm at play this week with open calls and puts, but I'm also looking ahead and I see this huge call wall for 9/17 expiry.

This is the biggest wall I've seen in a while and am wondering what others think this means (if anything).

It is interesting that it is at $700 and could have been opened at anytime, but that it remains is something amazing to me as it is so high.

Both 9/10 and 9/23 are very small relatively and seem normal.

View attachment 702073

Triple Witching day:

Triple witching is when the expiration of stock options, stock index futures, and stock index options all fall on the same day. It only happens four times a year – on the third Friday of March, June, September, and December – which can create a spike in trading volume and volatility.

 

[Tslynk67]

So, do you folks selling 9/3 calls today not think the stock is going to pop on Monday? I'm sort of assuming I'd do better to sell during a pop Monday than during the end-of-week suppression today. (Or are you saving to potentially sell more on Monday as well?)

One in the hand is worth two in the bush...