Wiki Selling TSLA Options - Be the House

[juanmedina]

I opened at few BPS for next 680/630 earlier with a 8% return. I should have close my BPS from last week and open more for next week. Hopefully I get a chance tomorrow.

 

[elasalle]

Funded 15 BPS based on selling Jan 24 1600's for ~ 76$ against jan 24 900's I had bought for 180 a few days back.

BPS - next week 670/660.
BPS is an experiment for me, starting small. I will move 4-6% profit out of account each week, let's see how well that does.
for 10% gain, need 10 hits without a loss .. or something like that. ...
Not adding gains back to account. ... until there is a big dip

 

[AquaY]

Quick question - I had a buy limit for 10/15 p685's set to $6.95 at the SP rose from $779 to $785, the "last" ticked to $6.94, but my order didn't trigger - how can that be?

Could be because there was simply someone else's order in ahead of yours and there wasn't more willing to sell there.
I know it seems weird that you were willing to pay 1 penny more but just because the trade got executed at a penny less than your limit doesn't mean the other guy had a limit order in at a lower price.
Had there been more sellers you would most likely have been filled at $6.94 as well.

 

[M3Rider]

If we're considering next week's options - we've got the Austin meeting tomorrow, and then the berlin event over the weekend - I don't think there is anything else expected prior to the end of next week.

Starting this Friday, we'll have new FSD Beta testers. If anyone gets into an accident, we are going to have a mega-FUD event with all the media and some senators petitioning for immediate stop to Tesla's FSD and opening new NHTSA investigations.

It really sucks having to think about this with all the other great news on the horizon.
I wouldn't personally be surprised about a $50-100 sp drop if they try really hard. Probably won't be long lived, but could ruin that week's bps for sure.

 

[adiggs]

Why close it now with 25% of the premium left on the table? Do you have another position you want to open and need to use the margin? Do you currently expect the closing price on Friday to be well above the short strike on your BPS?

I'm personally happy holding my spreads until near the very end when I close them for max profit. If there's a more profitable trade you want to move to then its understandable closing but otherwise not.

What a lot of people new to spreads may not fully understand is that they have a relatively flat profit curve that only yields the last part of its value near expiry. You have to wait for the P+ to lose its extrinsic value closer to expiry before you gain the max profit. This is different to straight Puts and Calls where the profit curve is much more linear. If IV goes up during the week it can keep BPS values elevated, but the most important thing is the closing price. As long as the stock price closes above the P- you will get your maximum available return.

This is good stuff and something I wanted to add on a bit. What I experienced when I was (briefly) doing much more narrow spreads is consistent with this comment - the profit profile was very flat, with little or no movement for most of the time to expiration, and then near expiration where the bulk of the profit happens. As I see it, a clear consequence is to wait until close to expiration, and maybe even plan for most positions to go all the way to expiration (I still don't like letting positions expire worthless, but that's a personal hangup I have ).

But with wider spreads the behavior is more and more like short puts. This is all on a continuum of course, but its another reason to at least start with wider spreads for those with experience doing short puts. The behavior on a $200 wide spread is pretty much indistinguishable from a short put, probably up to $50 ITM. And it turns out that the premium per contract is pretty close - the distant long put costs almost nothing when its $200 further OTM than the short put

A benefit of these wider spreads with more short put (or call) behavior is the ability to close early and open replacement positions frequently, due to their behavior being closer to the short put (or call) on its own. Of course that carries the downside of that extra attention and trading activity.

 

[mickificki]

Starting this Friday, we'll have new FSD Beta testers. If anyone gets into an accident, we are going to have a mega-FUD event with all the media and some senators petitioning for immediate stop to Tesla's FSD and opening new NHTSA investigations.

It really sucks having to think about this with all the other great news on the horizon.
I wouldn't personally be surprised about a $50-100 sp drop if they try really hard. Probably won't be long lived, but could ruin that week's bps for sure.

I really don’t see the stock going down much next week. I’m assuming that earnings will be on Wednesday the 20th, and the prior week is usually flat to slightly up no? So much positive things are going on, any push downward will bounce back imo.

 

[vwman111]

This is good stuff and something I wanted to add on a bit. What I experienced when I was (briefly) doing much more narrow spreads is consistent with this comment - the profit profile was very flat, with little or no movement for most of the time to expiration, and then near expiration where the bulk of the profit happens. As I see it, a clear consequence is to wait until close to expiration, and maybe even plan for most positions to go all the way to expiration (I still don't like letting positions expire worthless, but that's a personal hangup I have ).

But with wider spreads the behavior is more and more like short puts. This is all on a continuum of course, but its another reason to at least start with wider spreads for those with experience doing short puts. The behavior on a $200 wide spread is pretty much indistinguishable from a short put, probably up to $50 ITM. And it turns out that the premium per contract is pretty close - the distant long put costs almost nothing when its $200 further OTM than the short put

A benefit of these wider spreads with more short put (or call) behavior is the ability to close early and open replacement positions frequently, due to their behavior being closer to the short put (or call) on its own. Of course that carries the downside of that extra attention and trading activity.

I guess it comes down to whether you will make more waiting for the last $1-2 at the end of the week or opening a new position for the following week. My gut says the new position will provide better return than waiting for the last couple of dollars of value to drain out of the spread. But that isn't supported by anything.

 

[InTheShadows]

I guess it comes down to whether you will make more waiting for the last $1-2 at the end of the week or opening a new position for the following week. My gut says the new position will provide better return than waiting for the last couple of dollars of value to drain out of the spread. But that isn't supported by anything.

I have quite a bit of experience with this. It is almost always better to close sooner and reopen a new position. Weather closer to the strike or for the following week. I look at my total expected profit and divide that by the number of days, if the return gets way a head on the daily basis then I close and reopen. If you think about it. You originally open a position that expires in 8 DTE (Thursday). Your calculated return on capital is 8%. If on Monday (4 DTE, although really it’s only been 2 trading days because off days are factored into theta) you are at 75% of max profits, math says close the position and reestablish. You realized 75% of your profits in 50% (really 33% because of the weekend). You should exit and re establish.

This is why I use GTC close orders once I open a position, often times that order will trigger near a low bps price of the day, like this past Monday. It also enables you to catch momentum in the options price when there is a dramatic move. You can see Inter day spikes of 50% of option prices in the last 4 days quite often.

 

[vwman111]

I have quite a bit of experience with this. It is almost always better to close sooner and reopen a new position. Weather closer to the strike or for the following week. I look at my total expected profit and divide that by the number of days, if the return gets way a head on the daily basis then I close and reopen. If you think about it. You originally open a position that expires in 8 DTE (Thursday). Your calculated return on capital is 8%. If on Monday (4 DTE, although really it’s only been 2 trading days because off days are factored into theta) you are at 75% of max profits, math says close the position and reestablish. You realized 75% of your profits in 50% (really 33% because of the weekend). You should exit and re establish.

This is why I use GTC close orders once I open a position, often times that order will trigger near a low bps price of the day, like this past Monday. It also enables you to catch momentum in the options price when there is a dramatic move. You can see Inter day spikes of 50% of option prices in the last 4 days quite often.

Thank you, that is very helpful, In that example, where you close on the Monday, do you usually:

1. Re-enter with a higher put closer to ATM,
2.Wait for a dip and re-enter around the original strike where some technical analysis may have originally been performed to determine the strike
3.Enter the following week's spread

 

[mickle]

This is starting to make sense as to why having more shares doesn't mean more earning power, because it is cash that allows one to sell more and more contracts, not shares.

For ex, in TD the Concentration Guideline for TSLA is $750k at 50%; therefore, max Option Buying Power = 750k + cash.
View attachment 718636

At sp=782, that means if one has more than (750k/50%)/782=1,918 shares, the remaining shares don't contribute to available margin.

Even if one has 1,919 or 5,000 or 10,000 shares, the Option Buying Power is still 750k + cash.

The only way the 1919th to 10000th shares will make $ is through
- sp appreciation (but this isn't income and doesn't compound and takes years to realize)
- STO CC (prem is too small to bother)

In other words, if I am in income-generating mode, keep only 1918 shares and convert the rest to cash.

What if there is a downturn? Assuming lowest sp going forward is 500, then i only need to keep (750k/50%)/500=3,000 shares in the margin acct. Convert everything else to cash in order to instantly increase the Option Buying Power. Shares #3001 to #10000 converted to cash earns more instant income (ie as credit spreads) and it compounds. The return is way more than waiting for stock price to rise.

I am not aware of these limits with Etrade or Fidelity. But if it did exist, the limits are usually done only by account, not by name, so you should be able to get around it by just opening a second account and splitting your shares between them.

 

[MP3Mike]

I am not aware of these limits with Etrade or Fidelity. But if it did exist, the limits are usually done only by account, not by name, so you should be able to get around it by just opening a second account and splitting your shares between them.

FYI: I think E*TRADE limits you to one margin account. (And one portfolio margin account.)

 

[Drezil]

Thank you, that is very helpful, In that example, where you close on the Monday, do you usually:

1. Re-enter with a higher put closer to ATM,
2.Wait for a dip and re-enter around the original strike where some technical analysis may have originally been performed to determine the strike
3.Enter the following week's spread

2 if it is not Thursday or Friday.
Price is a bit less than what I originally opened them for - approximate Theta decay.
If I opened for 5$, Theta is 1$ and it closed 3 days later I would reopen for 5-3 = 2 -> around 1.75 or so .. 1.25 would have been the 75% target, so reopening adds ~0.5 or 10% to the original premium.

 

[pz1975]

This is starting to make sense as to why having more shares doesn't mean more earning power, because it is cash that allows one to sell more and more contracts, not shares.

For ex, in TD the Concentration Guideline for TSLA is $750k at 50%; therefore, max Option Buying Power = 750k + cash.
View attachment 718636

At sp=782, that means if one has more than (750k/50%)/782=1,918 shares, the remaining shares don't contribute to available margin.

Even if one has 1,919 or 5,000 or 10,000 shares, the Option Buying Power is still 750k + cash.

The only way the 1919th to 10000th shares will make $ is through
- sp appreciation (but this isn't income and doesn't compound and takes years to realize)
- STO CC (prem is too small to bother)

In other words, if I am in income-generating mode, keep only 1918 shares and convert the rest to cash.

What if there is a downturn? Assuming lowest sp going forward is 500, then i only need to keep (750k/50%)/500=3,000 shares in the margin acct. Convert everything else to cash in order to instantly increase the Option Buying Power. Shares #3001 to #10000 converted to cash earns more instant income (ie as credit spreads) and it compounds. The return is way more than waiting for stock price to rise.

This is why I am opening an IB account and will change to them. My current broker (iTrade in Canada) has a maximum margin of $2 million for TSLA no matter how many shares. I want to join the $100K/week club too.

 

[deerfield]

I have been been keeping my options premium as cash. I started out trying to accumulate shares, then realized that it's hard for me to time an entry point. Then I noticed that my options premium simply eclipsed whatever my share price gains were. I made money regardless of whether the share going up or down. And this is all realized gain. So no more emotional paper gain rollercoaster for me. I now simply track my cash position. I get more and more buying power every week.

 

[Buckminster]

I have been been keeping my options premium as cash. I started out trying to accumulate shares, then realized that it's hard for me to time an entry point. Then I noticed that my options premium simply eclipsed whatever my share price gains were. I made money regardless of whether the share going up or down. And this is all realized gain. So no more emotional paper gain rollercoaster for me. I now simply track my cash position. I get more and more buying power every week.

Yacht buying power?

 

[InTheShadows]

Thank you, that is very helpful, In that example, where you close on the Monday, do you usually:

1. Re-enter with a higher put closer to ATM,
2.Wait for a dip and re-enter around the original strike where some technical analysis may have originally been performed to determine the strike
3.Enter the following week's spread

I wait for a pause or a pullback if I can get it. I’m not concerned about squeezing every penny out. The movement of money is what makes money. This is why I like to close early.

If they close on a Monday or Tuesday I usually open for the same week. Wednesday it depends. Thursday and Friday I go to the following week.

On these new positions I usually shoot for between one std deviation and -20 delta. Which usually means I’m closer to the money because there are fewer days left.

 

[InTheShadows]

FYI: I think E*TRADE limits you to one margin account. (And one portfolio margin account.)

They all (brokers) limit you to one margin account of account type. So if you have an individual account and a joint custodial account they each can have margin.

 

[AquaY]

TSLATESLA INC COM $782.750.00 (0.00%) At close: Oct 6, 2021, 4:00 PM ET
Extended hours
$790.30+7.55 (+0.96%)

Might be time to dip my big toe in the call writing pool once again.
Lets see where premiums lie above some resistance levels

 

[Knightshade]

Last I checked a couple days ago short term sold call premiums remained terrible. Low enough I wouldn't be writing any ahead of both a shareholder meeting and potential announcements at 2 new factories (and potentially a wider FSD rollout) all happening in the next 3 days.

 

[UltradoomY]

Last I checked a couple days ago short term sold call premiums remained terrible. Low enough I wouldn't be writing any ahead of both a shareholder meeting and potential announcements at 2 new factories (and potentially a wider FSD rollout) all happening in the next 3 days.

Agreed, however if you are able to be in front of the computer or want to set a GTC order for percentage of profit - there have been 3 great BCS or straight CC strategies that have been very profitable so far this week.
STO on the morning / opening pop - $805ish and BTC at around noon for 50% profit. Has added a nice return so far this week.
Of course *Not Advice* and YMMV, but I will be looking to do the same again today.
along with setting my BPS for next week during the drop (when I close out the CC's)
Looking at -$725 / +$650 for hopefully $6 credit each or better.
Cheers!