FWIW, also compare an equivalent ITM covered call vs an equivalent OTM cash covered put. They're essentially the same P/L, but it almost never works out that the extrinsic value is exactly the same, so its worth identifying the position that maximizes $/capital/time.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
FWIW, also compare an equivalent ITM covered call vs an equivalent OTM cash covered put. They're essentially the same P/L, but it almost never works out that the extrinsic value is exactly the same, so its worth identifying the position that maximizes $/capital/time.
Has the wheel stopped turning for most due to the drop in volatility, or are you just waiting to get post production/delivery? I have finally gotten my accounts set up, and am moving some of my shares to begin selling covered calls. Wondering when it might be good to start doing so.
Mokuzai
Member
@Lycanthrope So given the P&D and resulting reaction...when are you planning on offloading your Oct 16 calls? I'm thinking of waiting to at least Monday to see what happens.
Yeah, if we'd have run up to $460 yesterday I would have done it then. I expect we'd be there now if not for this Trump nonsense.
A bit annoying, so unless anything changes today will likely wait until Monday. I don't see much time-value in play any more, just intrinsic, so waiting shouldn't harm too much - unless Trump gets rushed to IC over the weekend, or something.
I'm almost tempted to sell anyway, I could get $150k for them right now, 3x what I paid, plus I'd sleep better...
Maybe the macro improves as the day goes by...
Pffff, timing selling is the worst!
The premiums are sad right now. I sold 7 covered calls yesterday for today for $400
. I wonder if the premiums are going to be like this when Tesla gets added to the S&P.... that would be disappointing. I sold a $375 strike put for $5.4 Oct16th for my parents, we will see how that one work outs.
Causalien
Prime 8 ball Oracle
Just came here to endorse this thread.
I've been doing this with the free cash that hold in my accounts. Just didn't know there was a name for it.
The recent volatility actually made this strategy more profitable than other strategies.
I've been doing this with the free cash that hold in my accounts. Just didn't know there was a name for it.
The recent volatility actually made this strategy more profitable than other strategies.
The premiums are sad right now. I sold 7 covered calls yesterday for today for $400
I sold a $375 strike put for $5.4 Oct16th for my parents, we will see how that one work outs.
Premiums are not that bad. We may have been spoiled over the last few months by the extremely high IV in anticipation of the possible S&P addition, but at the moment premiums are still higher than they were in spring and early summer.
I know premiums dropped a lot over the last week, but an Oct 30 call 415 - just 4 weeks out - still does about 42.00, which is 10% of the SP. Not bad if you ask me.
As the chart below shows IV is still at 90. Not as high as the 120 of a few weeks ago but higher than it was for most of the days this year.
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OK, managed to offload 20x October 16th c360's for $70 each.
TBH these had been keeping me awake at night, so I'm glad to be out of it. Yes I could have waited, but just had to de-risk.
Will sell some puts with the cash... these were valued at $320k on Split Monday, but with so many "catalysts" lined-up, I didn't sell, then it all started going wrong. Still, got 3x what I paid in July, so could be worse (if Trump has croaked then a strong possibility they would have become worthless...)
Now 5x Nov 21st c300 to deal with...
TBH these had been keeping me awake at night, so I'm glad to be out of it. Yes I could have waited, but just had to de-risk.
Will sell some puts with the cash... these were valued at $320k on Split Monday, but with so many "catalysts" lined-up, I didn't sell, then it all started going wrong. Still, got 3x what I paid in July, so could be worse (if Trump has croaked then a strong possibility they would have become worthless...)
Now 5x Nov 21st c300 to deal with...
Mokuzai
Member
Exactly the same for me, split wasn't even on the table when I first bought them...
I bet your cortisol has dropped dramatically, mine has! I was wanting $75, but decided best no to be greedy.
Also Thursday close was the moment to sell at $90...
What's clear is that unless there's a massive surprise, it's sell-the-news these days.
CLK350
Member
Not an expert here, trying to learn as fast as possible, while also getting some action/ practice while the markets catch up (or stop obfuscating) Tesla's growth or story:
- Well done on the Oct 16, the next couple weeks are going to be weird
- The Nov 21 should be an easier sell ....as we approach 3Q earnings Oct 28 - they are predicted to be blow out numbers
So covered calls only for Oct 9/ 16/ 23 *IF* the SP goes up "enough", eyeing the 480 for next Friday.
I *should* really stick to LEAPS and safe covered call plays, but I made an exception already, bought some TSLA 10/30/2020 440.00 C @ 37.00 average last Friday
Re most likely blowout numbers for 3Q, see Dave Lee
Yes, I prefer LEAPS, or at least much longer plays. Actually, these Oct & Nov were bought back in June/July, so not exactly short term, but always with the S&P, Q3 P&D, ER to boost us - and look what happened... Weird, weird, weird...
Howdy all - I've been out on a road trip the last week, so I've missed a lot.
My one remaining short term option are some Oct '20 365 puts. They're nearly down to nothing ($2 vs $25 when I sold them), and I'm wrestling with whether to close now or wait. The profit % makes it easy - close now.
But I'm also thinking that there will be a better opportunity to open a new position closer to earnings. And thus I waffle. Now that I write all that out, I'm going to go ahead and close today, and go looking for a new position out in November - December.
I've moved to exclusively using monthlies, with a preference of a time to expiration of 2-6 months, and even some yearly (especially calls). I am very much in the "income to live on" mind set now, which has helped simplify my thinking and reduced my aggression.
Welcome to the newcomers - I am especially looking forward to your contributions - what you're seeing and thinking about the share price and how you're translating that into positions, and why. For me, it is the mutual education here in the thread that is valuable, and I'm looking forward to learning from your wins (and losses).
My one remaining short term option are some Oct '20 365 puts. They're nearly down to nothing ($2 vs $25 when I sold them), and I'm wrestling with whether to close now or wait. The profit % makes it easy - close now.
But I'm also thinking that there will be a better opportunity to open a new position closer to earnings. And thus I waffle. Now that I write all that out, I'm going to go ahead and close today, and go looking for a new position out in November - December.
I've moved to exclusively using monthlies, with a preference of a time to expiration of 2-6 months, and even some yearly (especially calls). I am very much in the "income to live on" mind set now, which has helped simplify my thinking and reduced my aggression.
Welcome to the newcomers - I am especially looking forward to your contributions - what you're seeing and thinking about the share price and how you're translating that into positions, and why. For me, it is the mutual education here in the thread that is valuable, and I'm looking forward to learning from your wins (and losses
).
I closed those Oct 365 puts, and opened Nov 365 puts. The new positions are also in the $24 range I received when I opened the Oct 365 puts; so the price is big enough and the strike low enough that I like the risk/reward. My thinking here is that I expect some movement up in the stock, especially leading into the earnings announcement (plus for me). I also expect some increase in IV (bad for me) that might offset that improvement. I'll be surprised if we're down to 365 by mid-November, though I expect IV expansion and then compression around earnings (late October) and a non-zero chance of a noticeable lowering of share prices across the stock market after the election (happens early November).
Even if there is a big market reduction after the election that leaves these Nov puts in the money then I expect it to be reasonably short lived - at most the NEXT earnings report (early Jan) when Tesla announces yet ANOTHER huge year over year growth and another big quarter of earnings. Right or wrong, I believe this strongly enough to put some money on the table.
Bigger picture is that if I get into assignment range on these Nov 365 puts, that means I'll be buying shares at $340 (net). I have a hard time saying no to incremental shares at that price (at least today - I might feel differently in a month and a half).
This is also consistent with my secondary objective of shrinking my daily energy and effort I devote to this. With November currently being my soonest position of any kind, I am largely a spectator and ignoring daily price gyrations for most or all of October, and I like that. Yes, I'm pretty sure that I can earn better than ~$16-20 on these positions by working the weeklies. They would also consume >4x the time and energy for <4x the results. I'm more motivated to reduce the effort now, than I am to increase the results.
Greetings all,
I’ve been going through the entire thread, and I’m up to June 12. Thought I’d actually tap into your expertise as I’m going through it.
Me:
Newly retired, married, no kids,
moving to low cost Philippines in 4-6 months.
I’ve been paper trading for 6 months;
fairly comfortable with it, but now focused on option trading.
I plan to generate income from wheel option trading.
Assume 2 portfolio scenarios, $200k and $100k, with no taxes.
A) with $200k, I need $4k/mth (living expenses)
B) with $100k, I need $2k/mth
Any earnings above that would be used to grow the account.
With TSLA, here is my line of thinking:
1) Sell 2 puts, one $20 OTM until I am assigned, and 1 $50 OTM (gravy!)
2) Straddle once I have my first assignment:
a) sell a call, $25 OTM
b) sell another put, $30 OTM
Repeat
Questions for the experts:
What are the incremental risks in this instead of using Deltas for the SP?
What DTE’s do you find the most profitable and recommend?
If your portfolio is less than $200k, how much would you keep in cash?
What if it is only $100k?
Does any of this change if I actually use margin?
How about if I have no other source of income for the next 5 years?
What is the potential income range for this kind of trading?
I will be trading in Q1 2021, but maybe I can get in some practice swings here...
I’ve been going through the entire thread, and I’m up to June 12. Thought I’d actually tap into your expertise as I’m going through it.
Me:
Newly retired, married, no kids,
moving to low cost Philippines in 4-6 months.
I’ve been paper trading for 6 months;
fairly comfortable with it, but now focused on option trading.
I plan to generate income from wheel option trading.
Assume 2 portfolio scenarios, $200k and $100k, with no taxes.
A) with $200k, I need $4k/mth (living expenses)
B) with $100k, I need $2k/mth
Any earnings above that would be used to grow the account.
With TSLA, here is my line of thinking:
1) Sell 2 puts, one $20 OTM until I am assigned, and 1 $50 OTM (gravy!)
2) Straddle once I have my first assignment:
a) sell a call, $25 OTM
b) sell another put, $30 OTM
Repeat
Questions for the experts:
What are the incremental risks in this instead of using Deltas for the SP?
What DTE’s do you find the most profitable and recommend?
If your portfolio is less than $200k, how much would you keep in cash?
What if it is only $100k?
Does any of this change if I actually use margin?
How about if I have no other source of income for the next 5 years?
What is the potential income range for this kind of trading?
I will be trading in Q1 2021, but maybe I can get in some practice swings here...
I'm going to ignore most of what you wrote and go on my rant about "paper trading".
It's very easy to convince yourself that you will make money, because (being human) you think to yourself "I'd have bought at the bottom here", or "that's obviously a blip, I'll hold through it", or things like that. But once real money is on the line, it's much harder to make the correct decisions, and what is more, sometimes the trade you do want to make simply doesn't go through. Or you place a market order and discover it gets priced a lot differently than you expected. Or someone on the other side of the option decides to exercise it at a time that makes no sense to you, but it comes out to be exactly the wrong time. I can't even enumerate the ways that you can mislead yourself with paper trading.
So, take your $200k scenario. I suggest you use $50k to implement your strategy, and at $4k/month you can live off the other $150k for a few years (invested in something relatively solid, like ARKK). Once you've consistently turned a profit on the $50k, then you can top it up with whatever is left in your other investment.
"The market can remain irrational longer than you can remain solvent" -- John Maynard Keynes.
Nightmare scenario: it's March 2012. Back on Feb 19, you sold a $140 put, and made some money on it (it's hard to get historical options pricing, so I can't use real numbers here for the actual pricing of the option, but the stock prices you can get on Yahoo Finance by looking at the YTD chart; these numbers are post-split adjusted); on Feb 19 TSLA was $159.98. On March 11, the counterparty exercises your put (remember, you don't have any say in this) and you just bought TSLA for $140 at a time when it is trading at $86.04. What do you do? All your capital is tied up in TSLA stock that's worth about 70% of the money you used to have. It doesn't get back up to the initial price until mid-May, but by then you've eaten $8k of it for living expenses. And remember, this is Tesla doing well at a time everything else was crashing... what if everything else is fine but Tesla tanks all by itself?
Notes:
(1) it doesn't matter how long the period of the Put was, since it's the buyer who decides to execute it.
(2) The broker had withheld enough margin to buy the stock at $140. But now it's only worth $86, you've borrowed against margin to buy it, so now you get an instant margin call.
Of course I've chosen the worst scenario in recent memory. But people who paper trade usually only look at the best scenario. "Think how much I would have made if I sold the Put in March!"
Not a professional, not advice, but... not optimistic.
corduroy
Active Member
I'm really curious if you have seen better results in selling the weekly puts vs. longer expirations. I have been calculating what would be most profitable, and from an overall ROI perspective (not factoring time of management), it appears there is a bell curve with a peak ROI at about 3-4 week out expirations.
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