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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Gap perfectly closed. Now it goes down and buy call back at the low before Fed meeting? lol
Buy ITM LEAPs if you have to buy Calls
willow_hiller
Well-Known Member
I don't think I'm going to buy another option until I can get approval for spreads... When buying a single option position, you end up paying for a lot of tail-end probability. At least with spreads, you can cap the potential gain at a reasonable strike for a huge reduction in premium.
Sure the order page says "Maximum Gain: Infinite," but as a finance professor of mine once said, "When's the last time you saw a stock go to infinity?"
bkp_duke
Well-Known Member
Eyeing closing out my 670/700 BPS. Currently at 84%. Would like to see it move just a TAD further.
Also eyeing opening up a BCS for 10/01 expiration. Thoughts on strike prices? The 770/800 looks tempting, but it's also just 20 points away from the current share price, and might get blown through if there is momentum upward.
Also eyeing opening up a BCS for 10/01 expiration. Thoughts on strike prices? The 770/800 looks tempting, but it's also just 20 points away from the current share price, and might get blown through if there is momentum upward.
Does anyone have any insight into the mechanics of the crazy difference between calls and puts right now? At SP ~750 a p725 is 2.75 while a c775 is 0.26. That a 10x difference for basically the same delta. Is it just pure supply/demand forces or can the MMs skew those prices deliberately?
Closed out my $780/$830 and $770/$810 call spreads at 95% and 60% profit and a net of $1.90 and $0.60 in premium per spread, respectively. Let's see what this afternoon brings; will look to resell something at $780+ on a good pop. In the meantime, letting my $730 and $690 puts ride.
I believe it is the very high put side imbalance.
I could be wrong, but I've noticed this before when puts get way more sold than calls, the call bids go way down. It also makes way for a big stock move that doesn't hurt call sellers as much.
Bullish for SP is my take
KTC Lurker
Member
For you BPS traders - if I look at opening a -720/+690 BPS, the net credit despite a green day looks like ~$1.10. If I sell 100 of these, and am very confident the stock won't end the week at or below 720, is there a risk I'm not seeing? I've only ever sold calls and puts... is there some other mechanic of a BPS that I'm missing that makes this riskier?
Before the inevitable comments to read back through the thread, I've done that to an extent, but not seen this question answered specifically.
Before the inevitable comments to read back through the thread, I've done that to an extent, but not seen this question answered specifically.
The risk is fully defined in a BPS. Your max loss per contract is (720-690-1.10)*100 = 2890. At 100 contracts then your max win is 11000 and your max loss is 289000. If the stock ends the week > 720 you get max win. If the stock ends < 690 you get max loss. In the middle is a gradient. There is nothing more to it from a gain/loss perspective, but note that once the stock price passes the midpoint of the spread to the downside (705) you cannot roll for credit.
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KTC Lurker
Member
corduroy
Active Member
It's all about your personal risk tolerance. I would consider that a narrow spread and narrow spreads can go from max profit to max loss very quickly if things turn south. Wider spreads are more forgiving. That trade would have been hugely profitable on Monday, but today most of the value has eroded, to me it would not be worth it anymore. Best of luck if you try it.
InTheShadows
Active Member
I hope you are right. I have a log full of averaging down for loosing long option positions that went bust. Those are often my largest losses. Well crap that was a deal at $16 per contract now it’s $8. Then later wow now it’s only $3, better get 5 more. Dang, $1.5, 15 more. Now my average cost is 7.50. Then they expire worthless.
Those also most often happened around events.
Because of this I have a rule of never add to a loosing position. I have broken that rule twice and both times I ended up with the same results.
I have been so tempted to buy calls for next month because I am so massively bullish. (I think we will break 1000 by EOY). Then I look at how much I have been making selling theta that it helps remind me that slow and steady wins the race. (I used to run marathons too so I know fast out the gate gets you either a walk across the finish or a DNF) Same is true with options.
If I understand the idea correctly, wouldn't you roll the long / insurance put UP or closer to the short / money making put?
An example of how I am thinking about the idea (not something I've done before, but I like the sound of) - I have 630/730 puts open right now for this Friday. They are priced at .38 and 3.25. I want to let them continue with the time decay but I also want to recover margin to open a position for next week. I could cut the margin for the position in half by rolling the insurance put from 630 to 680 where the option is priced at .70. I pay .22 now (.70 - .38) and cut the margin reservation in half.
That'd only be valuable if I want to open a new position.
Whether I understand your notion correctly or not, this opens up another possibility. I opened these 630/730s because it was over a week to expiration and I didn't have a good sense of the closing price this week. I was being aggressive but I thought safe and the wide spread helped me with that combination (relatively aggressive, while also more management choices in case I'm badly wrong). Now here on Wednesday I think that 730 is completely safe. I can just allow this position to continue aging, OR a new idea that just occurred to me.
Roll from my 1x 630/730 position to 2x680/730 positions. I'll collect the current premium - 3.25 on the additional 1x positions, while paying the difference in premium for the current insurance, and adding the full cost of the new position.
So the current position at 3.25 - .22 becomes two positions at 3.25 - .70. I gain 2.55 on the new position and pay back .22 rolling the existing up for a net 2.30 per current position I am doubling up on. H'mm... And I'm not ready to open a put spread for next week, so increasing the available premium to earn this week sure sounds like a winner to me.
I could get really crazy and roll this whole mess up to 735 or 740 at the same time for even further premium, given that I expect this 740-750 range to hold. I think I have a management trade for myself for later this morning after the Fed report is out and we see what happens
Thanks @dl003!!
InTheShadows
Active Member
I often roll the short puts down. In my opinion, the risk lies in how close the short puts are to the stock price, not how wide the spread is. While you'd spend less money to release the same amount of margin if you rolled the long puts up, the risk wouldn't get reduced by that much.If I understand the idea correctly, wouldn't you roll the long / insurance put UP or closer to the short / money making put?
An example of how I am thinking about the idea (not something I've done before, but I like the sound of) - I have 630/730 puts open right now for this Friday. They are priced at .38 and 3.25. I want to let them continue with the time decay but I also want to recover margin to open a position for next week. I could cut the margin for the position in half by rolling the insurance put from 630 to 680 where the option is priced at .70. I pay .22 now (.70 - .38) and cut the margin reservation in half.
That'd only be valuable if I want to open a new position.
Whether I understand your notion correctly or not, this opens up another possibility. I opened these 630/730s because it was over a week to expiration and I didn't have a good sense of the closing price this week. I was being aggressive but I thought safe and the wide spread helped me with that combination (relatively aggressive, while also more management choices in case I'm badly wrong). Now here on Wednesday I think that 730 is completely safe. I can just allow this position to continue aging, OR a new idea that just occurred to me.
Roll from my 1x 630/730 position to 2x680/730 positions. I'll collect the current premium - 3.25 on the additional 1x positions, while paying the difference in premium for the current insurance, and adding the full cost of the new position.
So the current position at 3.25 - .22 becomes two positions at 3.25 - .70. I gain 2.55 on the new position and pay back .22 rolling the existing up for a net 2.30 per current position I am doubling up on. H'mm... And I'm not ready to open a put spread for next week, so increasing the available premium to earn this week sure sounds like a winner to me.
I could get really crazy and roll this whole mess up to 735 or 740 at the same time for even further premium, given that I expect this 740-750 range to hold. I think I have a management trade for myself for later this morning after the Fed report is out and we see what happens
Thanks @dl003!!
Ok - so something like this. My 630/730 spread - roll the 730 down to 710 ($20); that frees up a bit of margin - it definitely lowers my risk by a lot and probably makes it mentally trivial to let the position go through to expiration worthless (which might easy make up the premium I'm buying back early). Besides the risk reduction the other reason to do this is I don't want to open a replacement position until Monday, so maxing out the gain this week is valuable.
Let's roll that into a 630/710 spread. The 730 is going for 3.20 and the 710 is going for 1.60. So buy down the 730 to 710 for a really big risk reduction and create a meaningful probability that I'd just let it expire worthless.
Yet another reason I like this thread so much - this idea of buying out some but not all of the value in an open position isn't one that would have occurred to me. And yet I can see some value, as well as having my thinking about the world expanded in new directions.
My strategy for the moment - I'm not ready (even after the Fed announcement) to open new BPS for next week. But I'm feeling pretty good about that 740-750 range for this week (or higher).
Therefore - wait for the Fed announcement and a little bit of the market reaction, with an eye towards rolling my current 630/730 BPS up to something like 680/730 (2x the positions) or even 690/740 (2x the positions AND closer). My thinking is we're close enough to end of the week that there is some incremental and non-trivial premium to be had.
I've also got lotto ticket calls I purchased at the 770 and 780 range. I was expecting a significantly higher share price by this point in the week but clearly haven't gotten that. Having spent the money to get this far into the week, I'm going to leave these on until the Fed info drops and then decide what the reaction will be. Most likely I'll close these late in the trading day at a hefty loss and that'll be the end of these. They'll show a roughly 90% loss. For context I can also close the currently open BPS for a non-trivial net gain for the week - I made a conscious choice this week to use the big drop to start the week to use some (most) of the BPS earnings this week looking for a big gainer. The BPS also have enough incremental premium still available to earn that they'll be gaining P/L far faster than the purchased calls have to lose (the purchased calls don't have a lot left to go).
I've done roughly 1 of these ever I expect I'll keep an eye out for these opportunities - I almost can't avoid it as I look for option sales opportunities, but I expect these setups to come along <5 times/year and probably more like 1-2.
Therefore - wait for the Fed announcement and a little bit of the market reaction, with an eye towards rolling my current 630/730 BPS up to something like 680/730 (2x the positions) or even 690/740 (2x the positions AND closer). My thinking is we're close enough to end of the week that there is some incremental and non-trivial premium to be had.
I've also got lotto ticket calls I purchased at the 770 and 780 range. I was expecting a significantly higher share price by this point in the week but clearly haven't gotten that. Having spent the money to get this far into the week, I'm going to leave these on until the Fed info drops and then decide what the reaction will be. Most likely I'll close these late in the trading day at a hefty loss and that'll be the end of these. They'll show a roughly 90% loss. For context I can also close the currently open BPS for a non-trivial net gain for the week - I made a conscious choice this week to use the big drop to start the week to use some (most) of the BPS earnings this week looking for a big gainer. The BPS also have enough incremental premium still available to earn that they'll be gaining P/L far faster than the purchased calls have to lose (the purchased calls don't have a lot left to go).
I've done roughly 1 of these ever
I expect I'll keep an eye out for these opportunities - I almost can't avoid it as I look for option sales opportunities, but I expect these setups to come along <5 times/year and probably more like 1-2.Similar threads
