Wiki Selling TSLA Options - Be the House

[traxila]

Observation from about 3:30pm today.

The Oct 15 840 calls were around 1.40.
The Oct 15 660 puts were around 1.30.

TSLA was around 810.

Is it simply much easier to cash in on sold puts than calls for TSLA right now? Is every shareholder and their mama selling CCs all the time?

What am I missing?

Thanks.

 

[Discoducky]

What does it mean a put wall? How do you have to factor it in?

Go here or here and look at the graphs. Biggest spikes = walls. Happy to answer more questions!

 

[bkp_duke]

What does it mean a put wall? How do you have to factor it in?

 

[generalenthu]

Quick update from my side on the post earnings BPS and vol. My poison of choice to track this was a 720/670 spread with the 720 short expiring 10/29 and long expiring 10/22, playing a for a little extra IV crush. I will have to eventually roll the 670, but hoping it will be cheaper after earnings.

The spread went down in value and is in positive territory, but if I decompose the net delta and the net theta, the spread lost less value than what would be implied by the delta (from the rise in price today). In other words, the effective IV seems to have increased and has in this case more than offset the theta associated with this spread.

Not sure of the experience of others with straight BPS for 10/22, but assuming somewhat of a similar behavior.

PS: As a side note, I prefer to look at my exposure from a delta and theta combination, and since I am comfortable with the deltas from other positions, I am not losing sleep over the rally before i have my post earnings BPS in.

 

[charlesgres]

View attachment 720744

Yeah, got so far.. But what does it mean practically?

 

[bkp_duke]

Yeah, got so far.. But what does it mean practically?

Means if the stock price goes south there are a lot of 750 puts to be exercised. So selling puts below that is viewed as somewhat protective in terms of resistance to downward price momentum and options exercise.

 

[Tslynk67]

Go here or here and look at the graphs. Biggest spikes = walls. Happy to answer more questions!

Put prices have been elevated for weeks now, lots of conjecture as to why that might be, but we don't really know, just keep taking advantage of the fat premiums

 

[Discoducky]

Put prices have been elevated for weeks now, lots of conjecture as to why that might be, but we don't really know, just keep taking advantage of the fat premiums

I can't believe how high the put premiums are. I nearly closed out my puts at 75% profit (8x $750 this friday) and bought in at $13.90 $740's for 10/22, but I missed it by a few seconds at closing. Will wait until tomorrow, but I'm not expecting a drop tomorrow, if it does, wonderful, but if not, wow, premiums are so high.

 

[Drezil]

I wiped my account out in the 1987 crash by being stubborn and not accepting that the world had changed. By year end the market was back to where it was before the crash but I was not. Never fight the tape to the point you cannot continue the fight.
Since that event, I have become much more conservative and been much more successful. It is not rocket science.

/me laughs awkwardly in -87% drawdown this year ...

 

[adiggs]

Honest question. Who said 750 wall(20k contracts OI) was built by Hedgies? We all been selling 750 puts in this thread. I have 94 contracts(partial fill).

Why would Hedgies give a damn if price goes to 740 and people in this thread lose money?

The working assumption is that the market makers / hedgies take the other side of virtually every trade that retail makes, and that mostly means selling of options.

Using that 750 strike in particular, we're assuming that MM are the primary sellers of those puts and retail / hedgies / whoever are the primary buyers and owners of those puts. To the degree that the market makers can control the share price they would like it to be somewhere above 750 so that those 750 strike puts expire worthless.

The hedgies don't care if the shares go to 740 and we lose money - they care that they've sold a LOT more of the options in that lump and they don't want to lose money.

Of course if we're wrong and you and I are the primary sellers of those 750 strike puts, and they've been purchased by the market makers, then they would like the share price to finish below 750.


This gets more complicated by the reality that not every market maker or every hedgie has the same position or motivation, any more than you or I have the same position and motivation. The OI and put wall concept is an aggregate concept - there are MM above that in their own position, MM below that in their own position, etc.. with the sum being that put wall.


I recommend looking at the tables below the headline charts at the max pain website. In the second table you can see the put loss, call loss, and the combined loss at every strike. Max pain has been described elsewhere as a bathtub - there is a pretty big and wide bottom where the outcome is about the same for the universe of option sellers (which we believe to be primarily the MM - this is why we sell options; Be The House). Not every option seller has the same motivation (position), and not every option seller has the same ability to move the market, but its an overall result.

 

[M3Rider]

The working assumption is that the market makers / hedgies take the other side of virtually every trade that retail makes, and that mostly means selling of options.

Using that 750 strike in particular, we're assuming that MM are the primary sellers of those puts and retail / hedgies / whoever are the primary buyers and owners of those puts. To the degree that the market makers can control the share price they would like it to be somewhere above 750 so that those 750 strike puts expire worthless.

The hedgies don't care if the shares go to 740 and we lose money - they care that they've sold a LOT more of the options in that lump and they don't want to lose money.

Of course if we're wrong and you and I are the primary sellers of those 750 strike puts, and they've been purchased by the market makers, then they would like the share price to finish below 750.


This gets more complicated by the reality that not every market maker or every hedgie has the same position or motivation, any more than you or I have the same position and motivation. The OI and put wall concept is an aggregate concept - there are MM above that in their own position, MM below that in their own position, etc.. with the sum being that put wall.


I recommend looking at the tables below the headline charts at the max pain website. In the second table you can see the put loss, call loss, and the combined loss at every strike. Max pain has been described elsewhere as a bathtub - there is a pretty big and wide bottom where the outcome is about the same for the universe of option sellers (which we believe to be primarily the MM - this is why we sell options; Be The House). Not every option seller has the same motivation (position), and not every option seller has the same ability to move the market, but its an overall result.

Yeah, so every strike OI is an average of all sellers. I just can't help but notice that when a bunch of people here say "we sold bps" the total of them probably comes up to 1k of contracts.
And there's always a lot more people reading, trading, but not posting. So, what's the total from this thread? And other retail trading independently without reading it. And how these numbers compare to MM sales within those 20k OI?

Also, if an MM bought 5k puts from us and sold 5k puts to somebody else, they are neutral, they don't care how the price moves, so it's got to be that they sold significantly more than bought for the wall to matter to them.

Just feels like a question mark to me - who built that wall?

 

[Discoducky]

Yeah, so every strike OI is an average of all sellers. I just can't help but notice that when a bunch of people here say "we sold bps" the total of them probably comes up to 1k of contracts.
And there's always a lot more people reading, trading, but not posting. So, what's the total from this thread? And other retail trading independently without reading it. And how these numbers compare to MM sales within those 20k OI?

Also, if an MM bought 5k puts from us and sold 5k puts to somebody else, they are neutral, they don't care how the price moves, so it's got to be that they sold significantly more than bought for the wall to matter to them.

Just feels like a question mark to me - who built that wall?

I do see your point, maybe we all do for that matter, but we are most likely the minority of a low'ish wall.

And directly to your point, I do look out a few weeks in advance to be sure **we** aren't the ones building up walls. This comes in especially handy for monthly and quarterly expiry.

 

[InTheShadows]

I do see your point, maybe we all do for that matter, but we are most likely the minority of a low'ish wall.

And directly to your point, I do look out a few weeks in advance to be sure **we** aren't the ones building up walls. This comes in especially handy for monthly and quarterly expiry.

The other thing is we are not all selling the same strikes as each other. On a weekly basis I see someone post here of almost every strike sold within $100 of the share price. The only exception would be the atm strikes.

 

[bonk3125]

I’m currently holding some 670/720 and 690/740 bps that I opened on Friday. Plan to open more Mon/Tues then possibly some BCS if we don’t have fireworks by the end of the week.

Not advice. I was and still am ready to lose this cash. I spend an unhealthy amount of time reading about Tesla, TSLA, and options strategies. I make mistakes but try to fix them early. Sleeping well at night is very important and we all have different goals and risk thresholds.

Kudos if you’ve made it this far. Thanks for reading. Hope to contribute more.

To follow up on my post, I ended up opening some 850cc near the peak this morning. Added +680/-730p and tried to add +900/-850c near the top but it never quite reached the limit credit I had set. I tend to try and squeeze a few bucks with an ask slightly above the current, hoping a favorable swing will net me a little more credit. Sometimes it works, and sometimes it doesn't. When it does, I feel so smart. When it doesn't, then I usually waste a significant amount of time chasing the ask and like today, not ever getting it filled because I didn't get a good "deal". Anecdotally, I think I'd probably be more profitable just opening the contracts when it looks like we're on an up/downtrend instead of trying to time it perfectly. Still learning and trying to keep emotion out of it.

Open contracts for the week at 50-70% profitability so far. I think my strikes are pretty conservative, so I'm OK with letting theta burn through Thurs/Fri. I'll probably close them and open some contracts for next Fri, again hiding behind BB, EMA, put/call walls, etc. Singles and doubles, as it were.

 

[buttershrimp]

/me laughs awkwardly in -87% drawdown this year ...

Unfortunately, I don’t learn much of anything until I’ve failed hard. There really is something useful about being broken down only to be rebuilt from scratch. For some people that’s not a key ingredient… for me, it’s price of admission. It’s worked so far in my life (eye patch and prosthetic limb notwithstanding).

I will say that I’m worried about a substantial sell off around earnings that might make a BPS position feel stressful. Such is the life of a paranoid buttershrimp.

 

[ReddyLeaf]

The working assumption is that the market makers / hedgies take the other side of virtually every trade that retail makes, and that mostly means selling of options.

Using that 750 strike in particular, we're assuming that MM are the primary sellers of those puts and retail / hedgies / whoever are the primary buyers and owners of those puts. To the degree that the market makers can control the share price they would like it to be somewhere above 750 so that those 750 strike puts expire worthless.

The hedgies don't care if the shares go to 740 and we lose money - they care that they've sold a LOT more of the options in that lump and they don't want to lose money.

Of course if we're wrong and you and I are the primary sellers of those 750 strike puts, and they've been purchased by the market makers, then they would like the share price to finish below 750.


This gets more complicated by the reality that not every market maker or every hedgie has the same position or motivation, any more than you or I have the same position and motivation. The OI and put wall concept is an aggregate concept - there are MM above that in their own position, MM below that in their own position, etc.. with the sum being that put wall.


I recommend looking at the tables below the headline charts at the max pain website. In the second table you can see the put loss, call loss, and the combined loss at every strike. Max pain has been described elsewhere as a bathtub - there is a pretty big and wide bottom where the outcome is about the same for the universe of option sellers (which we believe to be primarily the MM - this is why we sell options; Be The House). Not every option seller has the same motivation (position), and not every option seller has the same ability to move the market, but its an overall result.

Ok, this is one of the informative posts that should be added to the FAQs.

 

[ReddyLeaf]

Come on dude, get with the programme, naked puts are soooo July 2021...

…and I was feel good about my trade too, best in weeks. $13.50 is almost 2%. Sigh, curses of my IRA broker not allowing BPS. You’re just trying to shame me into moving brokerage. It won’t work. (ok, it might work). Damn it, I’ll get in that 100k club soon (unfortunately, it might be pesos).

 

[adiggs]

…and I was feel good about my trade too, best in weeks. $13.50 is almost 2%. Sigh, curses of my IRA broker not allowing BPS. You’re just trying to shame me into moving brokerage. It won’t work. (ok, it might work). Damn it, I’ll get in that 100k club soon (unfortunately, it might be pesos).

I wish that $100k club idea had never started. Being in that club is first and foremost a function of a large portfolio devoted to this process. For those in the vicinity it comes something to 'strive for', where 'strive for' means potentially more aggressive positions that one would normally take.


Then again we all make our own decisions and experience our own consequences.

(PS. Gotta get spreads activated in the IRA dude )

 

[samppa]

Observation from about 3:30pm today.

The Oct 15 840 calls were around 1.40.
The Oct 15 660 puts were around 1.30.

TSLA was around 810.

Is it simply much easier to cash in on sold puts than calls for TSLA right now? Is every shareholder and their mama selling CCs all the time?

What am I missing?

Thanks.

yeah, selling calls or call spreads is just not worth the risk right now..

 

[ammulder]

This gave me the underlying capital to be able to make relatively low-risk trades that bring in $120k per week, below the 200MA, below all the put walls, >$100 below the SP, etc., and nevertheless I stress about a black swan wiping out a huge chunk of cash, and yes, given enough time it will happen, but the further you are from the money and the shorter your trade is active, the lower the risk and likelihood of disaster

I’m sorry but I have to ask… if you can make $120k per week low-risk, how did you end September negative? Were you not using this strategy then?

This past weekend, I made a low-risk plan for myself. Income goes down by half right now compared to the last couple weeks, but if all goes well, recovers to really good levels around the end of the year. It remains to be seen whether I can stick to it or will be forever tempted to ‘beat’ the plan. But I figure there’s enough uncertainty in the stock price just after the earnings call that it could be a good time to dial back the risk a bit.

If the earnings are really good and the stock continues to rise after, however, I’m not sure I’ll want to stick to the low-risk plan. It’s hard not to take advantage of a steady rise!