Wiki Selling TSLA Options - Be the House

[ReddyLeaf]

I'm on the fence here. I've got a 750 I sold, half with the intention of putting it through the wheel. I'm tempted to roll up to 760 next week for ~2$ profit. The shares are in short term with a relatively high cost basis so there wouldn't be much tax issue. I just worry that the stock might be starting to gap up. Then again, next week being the triple might send it back down. Good problems to have.

I rolled last week and found out on Friday that I really didn’t need to, or at least should have waited until Friday. This week, I decided to have balls of @Lycanthrope and hold until Friday. I expected the China numbers to be impressive, but then would follow the MM-induced SP or IV drop. Looks like that’s what is happening now (748 at time of post). I was really looking forward to rolling those c755s (just because it would finally mean closing the week over 750).

Mighty are the market makers!

I’m starting to actually wait for these daily drops.

 

[pz1975]

I'm glad so far that I held my 750 covered calls. If the macros had been up today, I would have rolled them but on a deep red macro day, TSLA often finds a way to drift back down even if up in the morning. I will probably close them for a profit sometime today because I still see the overall trend as going up and tomorrow TSLA could easily get to $760+.

 

[jeewee3000]

I'm glad so far that I held my 750 covered calls. If the macros had been up today, I would have rolled them but on a deep red macro day, TSLA often finds a way to drift back down even if up in the morning. I will probably close them for a profit sometime today because I still see the overall trend as going up and tomorrow TSLA could easily get to $760+.

Well the reason I closed when it dropped to 745,58 just now is because of this:

No, the line's currently at 745 so this is actually the first close above it since May. I wouldn't be surprised if we retest 745 tomorrow though

The SP retested 745 and bounced off cleanly. Wouldn't surprise me if TSLA does not go lower than 745. And even if it shoots up again +750 easily.

GLTA

 

[phantasms]

I'm glad so far that I held my 750 covered calls. If the macros had been up today, I would have rolled them but on a deep red macro day, TSLA often finds a way to drift back down even if up in the morning. I will probably close them for a profit sometime today because I still see the overall trend as going up and tomorrow TSLA could easily get to $760+.

Isn't there only upside and more "options" to roll the 750 to 760 next week for a gain? If the 750 ends up out of the money the 760 will have had lost a significant amount of premium.

 

[adiggs]

When is too early to roll CC that are $5 OTM (nine days)?

Such a simple question, such a difficult answer. NOT-ADVICE of course but....

I'm primarily in it for income in retirement, so a question I ask myself is whether a given choice is consistent with an income / dividend mindset. That frequently guides me to decisions that at least appear to be more conservative on the surface.

This particular question - I'd let it ride unless I was particularly worried about the move AND I knew I wasn't going to be able to monitor and react if it kept going against me.


So one thing I would do, and frequently, as you're still getting a feel for these is to setup a roll to see what's available. Setup a roll and see what you can get to for an additional week; maybe also 2 weeks, etc... What I remember is you get the best roll ATM, a really good roll while still slightly OTM or slightly ITM, and the quality of the roll falls off pretty rapidly at our current low IV situation.

So the benefit of rolling early is that you buy time while the roll is good as a mitigation for a disastrously big move against you. The downside is that you also increase the DTE which expands the window for that disastrously big move against you to occur in. There's nothing free

The income / dividend focus leads me to be more proactive about rolling. For me a roll is a defensive / loss management(mitigation) move where I'm trading a week of earning little income, in exchange for a position that I like better than the one I'm in. Losing a week of income is an opportunity cost, and I'm earning so much overall that the lost week isn't a problem.

What is a problem though is a particularly big move against me. Remember that we're making defined reward trades with unlimited risk. A single position going badly against can wipe out months or more worth of gains.


Another thought or criteria that I have specific to cc that you'd like to avoid assignment on - would I rather be assigned on the position as it is, or assigned at the position I can roll to? This works better at 3 DTE than 9 DTE (less time value remaining, better roll available), but the situation is what it is. In general if I could take a slightly ITM and add $10 to the strike along with a $1 credit a week later, that's an assignment I would prefer. And if the shares reverse and the option goes OTM by then, well I earned $1 for that additional week and didn't get assigned.

I can play this particular game a lot I have my own bias to not get more than 4 (maybe 5) weeks to expiration, and <3 is highly preferable. If I got that far out then I'd have a pretty strong bias towards letting it go to assignment (realizing that it might reverse as we get closer to expiration - these are decisions that can be made every day).

 

[adiggs]

Today has been just about perfect for my setup. The early $5 jump let me close my BPS early. I probably should have closed them yesterday for 60% gain, but decided to wait and they turned into a 70% gain this morning. I waited as I felt there was more upside move to come.

And then the shares turned around. They kept going and @CHGolferJim asked a question and while I was answering the shares moved another $1-2 in my favor and I was able to close out my 800/900 call spreads and 765cc for 60%(ish) gains. At this point that leaves me with everything out.


But wait! Shares down - sounds like a good time to be selling BPS. I'll be evaluating those now

 

[mickificki]

I rolled last week and found out on Friday that I really didn’t need to, or at least should have waited until Friday. This week, I decided to have balls of @Lycanthrope and hold until Friday. I expected the China numbers to be impressive, but then would follow the MM-induced SP or IV drop. Looks like that’s what is happening now (748 at time of post). I was really looking forward to rolling those c755s (just because it would finally mean closing the week over 750).

I’m starting to actually wait for these daily drops.

Nicely done! Thanks for sharing.

I stupidly panic-bought to close my 8x 745 strike CC's yesterday at a loss...sold a few tsla shares to do so.

I should've just rolled them out, a hard lesson learned!

STO 4x 9/10 760 strike, $2.90...here goes nothin'!

 

[CHGolferJim]

Isn't there only upside and more "options" to roll the 750 to 760 next week for a gain? If the 750 ends up out of the money the 760 will have had lost a significant amount of premium.

I’ve tracked rolling data occasionally, and there seems to be a weak pattern comparing consecutive weeklies, but it doesn’t always apply: the roll credit is fairly consistent as SP creeps up towards strike early in the week of expiration, then if it appears Friday’s closing SP might be <strike, the price of the call you STO’d (the BTC cost) drops faster than the out-week premium, increasing the benefit of rolling. Of course, you have to watch to make sure the STO doesn’t go ITM, at which point late in the week theta disappears and the option price = SP - strike which can continue to rise. Somewhere the data exists to definitively determine if this apparent pattern is actually the case.

 

[jeewee3000]

Isn't there only upside and more "options" to roll the 750 to 760 next week for a gain? If the 750 ends up out of the money the 760 will have had lost a significant amount of premium.

You are correct that - if the SP were to end up below 750 this friday, then the next week 760 you rolled to will have dropped quite a bit.

However, holding the 750 for this week in the first place would grant you greater profit, since theta decay is faster the closer the option is to expiration. The final days of an options "life" are where the fastest $$ are earned.

So therefore when the SP shoots up after I sold calls I rather:
a) let it ride 'till friday since weeks of 5 green days (or "weeks without any drops") are rare;
b) close my position for a smaller profit on the first decent dip, and then sitting on my hands waiting for another surge before STO again.

Only when the SP zooms $10-$20 beyond my strike price on huge volume is when I panicky start looking for rolls, combined with some "HELP?!" posts in this thread .

 

[adiggs]

Today has been just about perfect for my setup. The early $5 jump let me close my BPS early. I probably should have closed them yesterday for 60% gain, but decided to wait and they turned into a 70% gain this morning. I waited as I felt there was more upside move to come.

And then the shares turned around. They kept going and @CHGolferJim asked a question and while I was answering the shares moved another $1-2 in my favor and I was able to close out my 800/900 call spreads and 765cc for 60%(ish) gains. At this point that leaves me with everything out.


But wait! Shares down - sounds like a good time to be selling BPS. I'll be evaluating those now

I would normally be doing 9/17 BPS today, but I'd like more resolution on next week before committing.

I like 745 as a floor - we'll see if that holds or not. In that spirit, piling back in with 730, 735, and 740 BPS using a $100 spread size. I'm going with this little bit larger spread size as I see effective management available down below $700. These are awfully close to the money but there also isn't much time to expiration.


I am as ready to close early on these as I am to roll aggressively out to 9/17. I guess part of my thinking is that this is sort of like selling 9/17 today in the event of a further drop in the share price pushing these into the money. And if shares move up even a little bit these will become high % profitable fast.

 

[Yoona]

my ic this week is safely snugged in right at the middle of range

 

[EnzoXYZ]

For next week I’m thinking about more aggressive CC as we been on a up trend since mid August. Really if looking back and out since May‘s high $500s. My usual CC would be $40-50 above current share price so may look to do closer to $30 for next week. I’ll still have my bulk of CC $50+ OTM.

 

[ReddyLeaf]

For next week I’m thinking about more aggressive CC as we been on a up trend since mid August. Really if looking back and out since May‘s high $500s. My usual CC would be $40-50 above current share price so may look to do closer to $30 for next week. I’ll still have my bulk of CC $50+ OTM.

I’m thinking about 770-780s, selling Tuesday or Wednesday around 10am EDT. Not advice. Probably too aggressive, but will definitely check the call wall on Monday.

 

[AxlxA]

This is tastytrade segment on credit spread management, exactly as we have discussed here in the past few weeks.

 

[pz1975]

I rolled my $750 covered calls before close at $753 to Sept24 $780s - able to sell 10% fewer contracts and made the net debit/credit zero. I am happy with this roll. I missed the bottom at $745ish (was busy at work) but I'm glad I didn't roll at $760 yesterday or today.

 

[InTheShadows]

I hope tomorrow’s action is nearly identical to today’s. I have GTC orders on all my put spreads that I reopened yesterday. They are all within a few pennies of executing. So a nice little pop tomorrow am and they should all close then leave me waiting for the mmd to reopen them for next weeks exp.

I don’t have the guts to open any short calls (LCC or CC) right now. I’m afraid of the $20-50 gap ups we saw last fall coming back. I might attempt to sell a few 805’s for next week tomorrow. There does seem to be a sizable wall at 800 for 9/10.

 

[PastorDave]

my ic this week is safely snugged in right at the middle of range
View attachment 706691

@Yoona , can I ask what day of the week you typically sell your ICs? I'm trying to move more of my margin towards ICs, but I think I'm waiting too long to sell because I'm not getting the premium I want. Right now I'm trying to sell the week before to see how that goes, but it's a little nerve wracking right before a catalyst (FSD 10) and quad witching. Thanks!

 

[Yoona]

@Yoona , can I ask what day of the week you typically sell your ICs? I'm trying to move more of my margin towards ICs, but I think I'm waiting too long to sell because I'm not getting the premium I want. Right now I'm trying to sell the week before to see how that goes, but it's a little nerve wracking right before a catalyst (FSD 10) and quad witching. Thanks!

I normally have 1-4 ICs open and this is my way of spreading the risk/margin so that one mistake does not blow up my account and ruin months of work.

#2 is a weekly IC, normally opened on Wed/Thu once I am "sure" of the Friday closing. STO the sides separately on dip/peak. I think of a weekly IC as a "top-up" that gives me back the commissions/fees I spent that week. If the Friday closing is super obvious or if my margin room is above my "mental reserve", I tend to open more contracts. BTC on Friday is a must. If the Friday closing is sketchy/unpredictable, or if the credit is too small compared to margin room it is risking, there's no weekly IC.

The remaining ICs (#1,#3) are non-weekly and opened 1-3 weeks early. This allows me to get bigger credits. I look for fast dip on Thu/Fri and STO the BPS. STO the BCS on Monday rise. BTC at 90-95% and then look for the next deal. I am now thinking 80% is probably good enough and move on. This kind of IC may have less overall credit than doing weeklies, but i like the idea of less babysitting, putting unused margin to work, and most of all: spreading out the risk into multiple/smaller contracts on different DTE.

Although i'm careful, I'm not too scared of high IVs near catalysts. Ever since i learned of the flip-roll and split-flip exit strategies (discussed upthread) thanks to the excellent experts here, I've gained high confidence in knowing how to fix problem spreads.

Not advice from rookie!

 

[buttershrimp]

I normally have 1-4 ICs open and this is my way of spreading the risk/margin so that one mistake does not blow up my account and ruin months of work.

View attachment 706955

#2 is a weekly IC, normally opened on Wed/Thu once I am "sure" of the Friday closing. STO the sides separately on dip/peak. I think of a weekly IC as a "top-up" that gives me back the commissions/fees I spent that week. If the Friday closing is super obvious or if my margin room is above my "mental reserve", I tend to open more contracts. BTC on Friday is a must. If the Friday closing is sketchy/unpredictable, or if the credit is too small compared to margin room it is risking, there's no weekly IC.

The remaining ICs (#1,#3) are non-weekly and opened 1-3 weeks early. This allows me to get bigger credits. I look for fast dip on Thu/Fri and STO the BPS. STO the BCS on Monday rise. BTC at 90-95% and then look for the next deal. I am now thinking 80% is probably good enough and move on. This kind of IC may have less overall credit than doing weeklies, but i like the idea of less babysitting, putting unused margin to work, and most of all: spreading out the risk into multiple/smaller contracts on different DTE.

Although i'm careful, I'm not too scared of high IVs near catalysts. Ever since i learned of the flip-roll and split-flip exit strategies (discussed upthread) thanks to the excellent experts here, I've gained high confidence in knowing how to fix problem spreads.

Not advice from rookie!

Thank you for this fantastic summary. It's simple and sophisticated. As you manage risk by diversifying time and price. You can tell you have spent a lot of time figuring out how to best deploy these strategies on TSLA. Only things I disagree with is you still calling yourself a newbie.... I think you should start calling yourself like a greenbelt or Blue belt or something .

 

[buttershrimp]

Thank you for this fantastic summary. It's simple and sophisticated. As you manage risk by diversifying time and price. You can tell you have spent a lot of time figuring out how to best deploy these strategies on TSLA. Only things I disagree with is you still calling yourself a newbie.... I think you should start calling yourself like a greenbelt or Blue belt or something .

By the way, how often do all these strategies make it to the finish line? The 3rd condor is the one that would scare me if I were to attempt it.... that is unless you plan to hold it for a week or two.