Wiki Selling TSLA Options - Be the House

[AquaY]

I still don't have a portfolio margin account. It scares me .

Better to have and not need than to need and not have

 

[dc_h]

I'm currently working with a couple of my sons building their accounts that are at a similar size. We're basically taking half of the excess liquidity available in their accounts and using that to determine how many IC they can sell in a given week. So for an account with a $6000 excess liquidity (assuming mostly cash) that would initially work out to around 1-2 contracts per week. Currently that would be returning $360-$900 per week depending on how conservative or aggressive the contracts are. So 6 to 15% return in the first week is not too bad. Compounding will also increase the number of contracts able to be sold per week over time. When I put all this into a spreadsheet and extend it out for a year, that $6,000 has the potential to turn into $750k+ (assuming perfect execution). We're only a few weeks in and expect a few stumbles along the way, but so far things are going according to plan.

I believe that's a strangle. You are not playing the direction, you are playing the volatility/price movement being smaller than what the market is anticipating. Let's say you get $20 for the CC and CCP (or just naked puts) combined, if the stock moves more $20 either way then you are in the loss. I think it's better to use this strategy when IV is high - for example, right before an ER?

You are combining the wheel into a single trade, rather than sell outs for next week, you’re doing it now. You have the margin to cover and I think you’re right that the price will stay in the 710-750 channel, making the trade profitable. I’d probably go smaller and cover half, just to see how it works out. I find my theories often lack a complete insight into all possibilities. If we close close to 730, you can close at least one position Friday when time value drops.

 

[pz1975]

End of July it was the first time I decided not to roll and got exercised on 660 & 680 and thought I could easily buy it back the week after (Of course, next week SP jumped up to >700 without any return). With the help of SP finally dropped two week ago, I bought some back but it was a painful experience of a waiting game although I did sell aggressive put during this timeframe.

Long story short, I have been rolling a 680cc which will expire this Friday. What would be the best feasible way to save this 680cc? (With this DITM, it won't be able to generate much premium even rolling into next week with the same strike.)

If you don’t mind rolling further out, you could consider splitting it into a sold put and call. That way at least one of the 2 positions will expire worthless for sure and possibly both. For example, if you sold a Nov19 $650 put and $820 call, you will get the $5,800 back you need to buy to close the $680cc. That’s what I would probably do. Then I would roll out one of them as needed if the SP is below $650 or above $820 nearing expiry in November.

 

[AquaY]

View attachment 703959
(Sorry for the super giant image)

No problem. I have Level 3 and use portfolio margin for my option trades
This was on Etrade ubder options levels information:

1. To place a naked equity call or put trade (levels 3 and 4) you must have margin equity of at least $5,000 in your margin account.
2. At levels 3 and 4, margin customers will be allowed to enter naked short put positions. These positions will be subject to the naked maintenance margin requirement rather than the cash-secured requirement.

Level 3 includes all level 1 & 2 strategies plus: Debit spreads & credit spreads Calendar spreads & diagonal spreads (long only) Naked puts2 Butterflies & condors Iron butterflies & iron condors
	Level 4 includes all Level 1, 2 & 3 strategies plus: Naked calls

 

[jeewee3000]

I held 730, 740 and 750 cc's that expire this friday.

Today I rolled the 730 cc's into 740 cc's two-for-one, same expiration date. So every 1x730cc became 2x740cc's.

This since I have way more faith in the 740 call wall than the 730 call wall.

 

[ammulder]

No problem.
Also on Etrade:

1. To place a naked equity call or put trade (levels 3 and 4) you must have margin equity of at least $5,000 in your margin account.
2. At levels 3 and 4, margin customers will be allowed to enter naked short put positions. These positions will be subject to the naked maintenance margin requirement rather than the cash-secured requirement.

Level 3 includes all level 1 & 2 strategies plus: Debit spreads & credit spreads Calendar spreads & diagonal spreads (long only) Naked puts2 Butterflies & condors Iron butterflies & iron condors
	Level 4 includes all Level 1, 2 & 3 strategies plus: Naked calls

So I guess I don't understand what it means to allow spreads but not allow portfolio margin. I wish the margin calculator let you run the numbers as if you had a certain options level.

 

[FS_FRA]

I held 730, 740 and 750 cc's that expire this friday.

Today I rolled the 730 cc's into 740 cc's two-for-one, same expiration date. So every 1x730cc became 2x740cc's.

This since I have way more faith in the 740 call wall than the 730 call wall.

Does your broker allow you to roll like this, or was it a 1x BTC and 2x STO ?

 

[jeewee3000]

Does your broker allow you to roll like this, or was it a BTC and STO ?

For options on the European stock exchanges, yes. For TSLA options, nope.

I BTC and STO manually.

But also: I rarely sell cc's against all my shares, for protection. The roll I did today exposed me more, but higher chance of gain. This doesn't maximize gains but my main goal is just to hold on to my TSLA shares for +10 years. If I gain some $$ on the way with options, even better.


Still have lots to learn regarding options. I'm mainly a cc guy, but also tried the Wheel (once) and now have my first BPS open this week and some long dated puts.

I'd like to try IC's but just like @ammulder my broker calculates margin per option currently. I could ask for portfolio wide margin (specifically meant for things as iron condors) but the risks are way higher. So I've decided to paper trade IC's for now, collect some more liquidity in the coming weeks with cc's/BPS's and enter the IC territory with a decent bank.

Now I'm just too much in shares/ OTM LEAPS and too little in cash. But I don't want to sell shares/let them assign since I think we're in a bull run for the rest of the year.

 

[AquaY]

So I guess I don't understand what it means to allow spreads but not allow portfolio margin. I wish the margin calculator let you run the numbers as if you had a certain options level.

I think margin is margin. Either you are approved or not approved and the margin calculator just shows margin required.
I could be wrong. I'm going to ask.
I will let you know what they say

 

[FS_FRA]

For options on the European stock exchanges, yes. For TSLA options, nope.

Do you mind sharing your broker? I'm currently with Interactive Brokers through Lynx as their "introducing broker". I haven't found a way to roll like that for TSLA either, wondering if someone here has more experience with the IB TWS?

 

[Drezil]

Does your broker allow you to roll like this, or was it a 1x BTC and 2x STO ?

In Germany (and similar in Austria, Liechtenstein etc.) there is no concept of "rolling" or "long term gains" or "short term gains". In Germany we had longterm-gains until ~2007 or so.. but this all got eliminated. And if you kept on holding than they would be "virtually sold & bought back instantly" at the end of 2017. At least my broker back then did exactly that.

We also have no tax-accounting-things. Every "roll" is xTC, xTO. Tax is calculated by FIFO (in germany), FIFO/Cost-average (Liechtenstein) etc.
So it is VERY simplistic.
But we also have no "whash sale"-rule, "pattern day trading", IRA, Roth and other stuff i read about here.

I suppose that in other EFTA countries this is similar as there were incentives to harmonize everything within the EFTA & EEA.

I.e. i am with IBKR as a broker. My account was located in London, UK until 21st of jan of this year & then moved to ireland because of brexit.
Other example: If i pay things in Liechtenstein in CHF, then i send money from germany to wise in belgium (in EUR), so they convert pay out in Liechtenstein. They will never wire the money - they will just change an entry in their belgium database & one in their swiss database.

It is all a BIG mess. And you do not want to introduce any country-specific things in that mix

But feel free to correct me if any of your european countries have other rules.. as said. Its a big mess

 

[dl003]

I think margin is margin. Either you are approved or not approved and the margin calculator just shows margin required.
I could be wrong. I'm going to ask.
I will let you know what they say

Portfolio margin is a risk based margin account. Instead of requiring full (lvl 1 margin) or reduced (lvl 3) collateral, it calculates margin based on how likely the option will go ITM. As such, a -400p will require substantially less than 4/6 the margin a -600p would require. The result is that while naked puts will cost much less margin to open, spreads dont enjoy the same reduction as in a normal margin account since the long leg reduces the margin by a (sometimes much) smaller amount proportionally compared to the short leg.

Furthermore, it also calculates margin using a stress test based on a -30% / +30% (or 40%/50% depending on the volatility) move in the underlying. This is in contrast with a normal margin account where a total loss forms the basis for the calculation.

 

[Drezil]

For options on the European stock exchanges, yes. For TSLA options, nope.

Where can you trade options on european exchanges? Do you mean warrants? I looked and never came across options on any european exchange..

 

[Yoona]

You can trade options in a TFSA?!

yes with TD.

 

[AquaY]

So I guess I don't understand what it means to allow spreads but not allow portfolio margin. I wish the margin calculator let you run the numbers as if you had a certain options level.

I got an answer.
Lets see if I can explain it correctly.
Portfolio margin is different than the maintenance margin I am using.
I was unfamiliar with Portfolio margin before this discussion.

First of all, the difference between what kind of trading strategy is allowed is different than the margin type.
The difference between Level 3 and level 4 trading strategies allowed is simply the ability to write naked calls in level 4 that you can't in level 3.

Now the difference in margin type accounts is something else.
In my type of margin account which is an old fashion Reg T type of a account, the margin required for an option trade is formula based and simple to calculate.
BTW, I can get level 4 and still have this kind of margin account.
But you must have level 4 to have portfolio margin

In the portfolio margin account it is more elaborate and takes the risk of your over all portfolio risk into account when calculating maintenance margin required of a trade.
You probably know this but it basically allows more leverage in spread trading or hedged positions.

 

[bkp_duke]

yes with TD.

Works in Fidelity too.

 

[samppa]

Do you mind sharing your broker? I'm currently with Interactive Brokers through Lynx as their "introducing broker". I haven't found a way to roll like that for TSLA either, wondering if someone here has more experience with the IB TWS?

with IB's optionstrader, you can construct pretty much any sort of rolls or multi-leg strategies.
Just add all the legs and it will count a bid/ask price somehow.

Earlier this year, when tsla went south fast, I rolled a deep itm put to 20x otm put bull spreads, pretty much same margin exposure.. don't remember exact figures right now.

 

[dl003]

This looks to me like, at the minimum, 750 call holders are abandoning ship to focus their firepower on the 740s. Better yet, both the 740s and the 750s could be getting abandoned. One can only hope...
If this keeps up, I will have to join our TSLAQ comrades on TWTR sooner rather than later.

 

[ZenMan]

Better to have and not need than to need and not have

Reg T margin account is safer. Your margin requirement will never change. Last year I had a portfolio margin account and overnight IB changed their risk assessment and I was $2 million underwater.

 

[ChefBoyardee]

Since we're at the top of the channel, I wanted a trade that can profit from a big drop, but didn't want any upside risk - this one looked interesting. Do you guys ever do butterflies like this?

9/24 Ratio Butterfly
+ 720P x 50
- 710P x 150
+ 700P x 100

Assumption:
The stock will swing back to the lower boundary of the channel sometime in the next 3 weeks, but not break below.

Plan:
Close the bear side at 80% profit (11.5k) and let the bull side expire worthless (24.5k), for a total of 56% RoC

If TSLA never dips:
Still a 25% RoC - no risk to the upside