Wiki Selling TSLA Options - Be the House

[Drezil]

i bought 2024 600 calls a while back & rolled them to jan 2023 - as i noticed they nearly have exact the same delta & theta. Only vega was way lower on the 2023s - but it freed up about 20-30% of the cash needed (so i can effectively buy 20% more or use that differently).

I don't want to hodl them so long anyway, because if they are too deep in the money, then they behave more like stocks with not enough leverage for my taste.

 

[strago13]

It depends on your broker and account setup. I did some careful analysis about a month ago comparing various strategies. I HODL my shares and sell spreads (IC, BPS, BCS) against the excess margin liquidity backing in the account. This gives me the maximum premium return against allocated margin. And the excess margin accumulates most by keeping premiums in the account as cash. So for me the best approach has been to accumulate cash to maximise the account liquidity to then sell even more contracts to generate more cash. At some point (very soon) I top out the number of contracts I'm prepared to sell and then use the generated cash to accumulate by buying LEAP spreads and shares.

I realize everyone is different with margin comfortability...I am leveraging about ~40% of my margin right now on puts. The rest of it I am leaving untouched in case the requirements change. How aggressive are you being w/ margin?

My big fear with BPS (vice the puts I am selling now) is if it actually hits that number, a loss of $200k or $100k could wipe out weeks worth of work and there really isnt any recourse. At least with getting assigned x shares at whatever I sell the puts at, I can manage my way out of that by selling aggressive covered calls on the way back up.

 

[ReddyLeaf]

Rolled out my p700s & p750s to 10/8 for about $11cr & $13cr, respectability. Earned enough on the 750s roll to convert the 700s into 750s. Love these puts, but wish I could sell BPS on margin in my IRA. Unfortunately, they’re still not making enough to offset losses on the -c770s & -c775s. Oh well, the CCs are rolled out to 10/15 and 10/22 so I’ll deal with them later. My only hope now is an IV crush next week.

 

[bkp_duke]

What is everyone's "not advice" for next week?

We have P&D that will likely come out over the weekend, then after hours on Thursday we have the annual shareholder report. I believe sentiment for both is "positive".

 

[mongo]

What is everyone's "not advice" for next week?

We have P&D that will likely come out over the weekend, then after hours on Thursday we have the annual shareholder report. I believe sentiment for both is "positive".

Here's one person's position

Options are whacked right now for those wanting to be bullish on OCT08.

Sold 730 puts, bought 800 calls, shorted 900 calls for 0.10 Net credit.

Paid to bet TSLA stays above 730 with huge upside exposure. Yes please.

 

[ChefBoyardee]

710/720/850/860 IC has some good premium for next week: 1.86 or 22% RoC

I'm also testing out a Double Calendar for the first time - the P/L graph looks too good to be true, so dipping my toes in with a small one (Expecting a loss from IV contraction, but doing it for science)

 

[UltradoomY]

What is everyone's "not advice" for next week?

We have P&D that will likely come out over the weekend, then after hours on Thursday we have the annual shareholder report. I believe sentiment for both is "positive".

I am in the camp of sell the rumor and then close out the sold rumors....
So IV is higher than it has been in a while and will get a crush after the annual meeting.
So selling farther OTM is easier since premium is higher and when it crushes it is even easier to close being farther away.
My new position for next week is only a BPS and not a full IC since I don't want to be in front of this if the doors blow off is -
-$720 / +$655P
Nice $7.50 credit each

 

[mickle]

What is everyone's "not advice" for next week?

We have P&D that will likely come out over the weekend, then after hours on Thursday we have the annual shareholder report. I believe sentiment for both is "positive".

I sold some CCs at 880 for next Friday, and will probably buy them back by Thursday, don't want to hold them after that.

Also plan to sell some BPS below 680 (in case macros drop), maybe later today.

 

[MXWing]

Here's one person's position

Trade is now at net debit, but its not a big deal to move up the short put side to 735-740 for a similar play.

It should be free money unless P/D is a complete disaster.

 

[stealthyc]

I realize everyone is different with margin comfortability...I am leveraging about ~40% of my margin right now on puts. The rest of it I am leaving untouched in case the requirements change. How aggressive are you being w/ margin?

My big fear with BPS (vice the puts I am selling now) is if it actually hits that number, a loss of $200k or $100k could wipe out weeks worth of work and there really isnt any recourse. At least with getting assigned x shares at whatever I sell the puts at, I can manage my way out of that by selling aggressive covered calls on the way back up.

I think saying there really isn't any recourse is not really true. There are all kinds of things you can do from taking an early loss, to rolling, to widening your spread, to flip/rolling, to doubling down at a better strike etc. Also, despite the thread name, I don't think practically anyone here is actually doing "the wheel", even when selling straight puts/calls.

 

[corduroy]

What is everyone's "not advice" for next week?

We have P&D that will likely come out over the weekend, then after hours on Thursday we have the annual shareholder report. I believe sentiment for both is "positive".

If recent history repeats itself, I don't expect either of these events to be a positive catalyst. These events that us hardcore investors get excited about seem to be dismissed by the wall street (probably from lack of understanding of the significance). Earnings next month could move the needle though.

 

[mongo]

Trade is now at net debit, but its not a big deal to move up the short put side to 735-740 for a similar play.

It should be free money unless P/D is a complete disaster.

Yar, stock price is bouncy (today?).
It's a tempting position, but I have no cash to back the puts. Now, if I made that a spread with less upside...
TSLA 4 Legs calculator

 

[MXWing]

Yar, stock price is bouncy (today?).
It's a tempting position, but I have no cash to back the puts. Now, if I made that a spread with less upside...
TSLA 4 Legs calculator

Very bouncy, I added to the same trade. 730 / 800 / 900 combo @ 0.10 net credit just now. Seems whatever trade you put in and let sit, it fills. LOL

 

[BornToFly]

I think saying there really isn't any recourse is not really true. There are all kinds of things you can do from taking an early loss, to rolling, to widening your spread, to flip/rolling, to doubling down at a better strike etc. Also, despite the thread name, I don't think practically anyone here is actually doing "the wheel", even when selling straight puts/calls.

Interesting timing on these two posts. I was laying in bed last night thinking about the risk of Put Spreads VS Puts using Margin, and how I would handle a margin call if the SP dropped 30%. With regular Puts, you can make the margin call go away by buying cheap, OTM protective Puts. With Put spreads, your fixes are more limited because you already bought the protective puts when you opened the position. The only solution I could think of is to NARROW (not widen) the spread, since the margin you need for each contract is determined by the width of the spread (650/550 needs $10,000 per contract, but a 600/550 needs half that at $5,000). Before I had realized this I was going to start using twice as many $50 spreads to keep the short Put farther out of the money, but a $100 spread gives you more ability to handle a margin call if the SP drops, so now I might stick with $100 spreads. Am I missing anything else?

 

[deerfield]

For those that are on interactive broker, is there a way to roll using the web interface and not TWS? I'm helping out a family member and can't seem to see anything on the web interface to do that. TWS is too complicated for a beginner to navigate.

 

[adiggs]

i bought 2024 600 calls a while back & rolled them to jan 2023 - as i noticed they nearly have exact the same delta & theta. Only vega was way lower on the 2023s - but it freed up about 20-30% of the cash needed (so i can effectively buy 20% more or use that differently).

I don't want to hodl them so long anyway, because if they are too deep in the money, then they behave more like stocks with not enough leverage for my taste.

Good lord - 2,024 calls!?! I'm playing in the wrong sandbox

 

[AquaY]

Interesting timing on these two posts. I was laying in bed last night thinking about the risk of Put Spreads VS Puts using Margin, and how I would handle a margin call if the SP dropped 30%. With regular Puts, you can make the margin call go away by buying cheap, OTM protective Puts. With Put spreads, your fixes are more limited because you already bought the protective puts when you opened the position. The only solution I could think of is to NARROW (not widen) the spread, since the margin you need for each contract is determined by the width of the spread (650/550 needs $10,000 per contract, but a 600/550 needs half that at $5,000). Before I had realized this I was going to start using twice as many $50 spreads to keep the short Put farther out of the money, but a $100 spread gives you more ability to handle a margin call if the SP drops, so now I might stick with $100 spreads. Am I missing anything else?

I like $100 spreads. But I do $50 ones as well and even wider ones sometimes.
The $100 spread gives me more maneuvering room and lowers the margin requirement than a narrower spread certainly.
Of course your risk of loss is greater than a narrower spread and you use more margin but your revenue is greater than a narrow spread with the same short leg and size
The argument for narrower spreads besides limiting the loss, it lowers the margin requirement and your return is greater.
You can make more money because you can be more leveraged due to the lower margin requirement and sell more contracts with the same amount of margin as a wider spread.

 

[adiggs]

wish I could sell BPS on margin in my IRA

At Fidelity I'm able to sell spreads in my IRA. The account also has margin, though that's really just to enable same day trading of unsettled cash.

The key bit was requesting Spread Trading authorization. Mechanically the 'margin' is reserved cash. So if I want to open 10x$100 wide spreads, I'll see a new line item in my account that amounts to the spread reservation of $100k. The cash value in the account will be reduced by $100k. When the position is closed later on, then the $100k reservation is moved back into the cash in the account.

 

[Chenkers]

I realize everyone is different with margin comfortability...I am leveraging about ~40% of my margin right now on puts. The rest of it I am leaving untouched in case the requirements change. How aggressive are you being w/ margin?

My big fear with BPS (vice the puts I am selling now) is if it actually hits that number, a loss of $200k or $100k could wipe out weeks worth of work and there really isnt any recourse. At least with getting assigned x shares at whatever I sell the puts at, I can manage my way out of that by selling aggressive covered calls on the way back up.

I use about 35-40% of the available excess margin liquidity in my accounts to sell options. This leaves a big buffer that I can use to adjust positions if needed.

A lot of us in here started out just selling CC against shares and Puts against cash. Over time much of this has moved to still selling CC but in addition selling BPS and IC in particular against margin or cash depending on the account setup. The reason to migrate to spreads is they allow far greater return on investment and ability to grow an account quickly.

In terms of risk, there have been concerns about big negative moves either forcing a loss or ending up in long term rolls for little account gain. However over time we have also become more knowledgeable in how to manage risk and get out of difficult situations more quickly and cheaply. For example the risk of getting a DITM call or Put exercised is very low as long as you roll early enough that the time (extrinsic) value is high enough that it makes no sense to exercise early. Rolling early can often allow you to roll for a credit, thereby earning more premium. Similarly we've learned to adjust ITM spreads so they close out more quickly. Either increase their number or spread width to get the sold strike OTM or say convert BPS's to BCS's or IC's of equivalent value that can go OTM. These approaches typically require extra margin, which is why it's important to keep a decent buffer.

Combine these management tools with strategies that minimise the risk of things turning sour (eg selling weeklies outside of OI Put/Call walls) and you can begin see some excellent results. In my particular case I've gone from returning a few tenths of a percent return each week to consistently averaging 4-5% return against my entire account value each week over the last 2 months. In terms of losses, I've only had 3 weeks this year that were losses with the aggregate of those losses being just 0.4% of the total option premiums earned to date.

But it's important to take it in small steps, trying things out gradually and safely until you gain experience and increased confidence. There's a huge learning curve to do this consistently but thankfully a lot of what you need can be found in this thread and through learning from what others are doing.

 

[stealthyc]

Interesting timing on these two posts. I was laying in bed last night thinking about the risk of Put Spreads VS Puts using Margin, and how I would handle a margin call if the SP dropped 30%. With regular Puts, you can make the margin call go away by buying cheap, OTM protective Puts. With Put spreads, your fixes are more limited because you already bought the protective puts when you opened the position. The only solution I could think of is to NARROW (not widen) the spread, since the margin you need for each contract is determined by the width of the spread (650/550 needs $10,000 per contract, but a 600/550 needs half that at $5,000). Before I had realized this I was going to start using twice as many $50 spreads to keep the short Put farther out of the money, but a $100 spread gives you more ability to handle a margin call if the SP drops, so now I might stick with $100 spreads. Am I missing anything else?

Regular puts are just 0-strike spreads, so yeah buying a protective put is just narrowing the spread. On portfolio margin at least for TD, the margin requirement for a regular put is roughly the loss at a 25% drop as I recall. Regardless, as the price drops, that requirement increases which obviously can lead to a margin call. Put spreads from the start (that are not ultra wide) on the other hand have fully defined margin requirement from the start, so only a drop in margin equity of your account causing a negative excess can get you called, so it is a little easier to pre-calculate a safe amount of margin to use. I think with spreads if you are entering margin call territory you probably either over-leveraged or have already missed the boat on repairing the trade.