Wiki Selling TSLA Options - Be the House

[ammulder]

I am conflicted about how to trade this week. Last week, I opened some BPS for 10/22 (720/620) with about half of the margin that I want to use in a week. Those are up significantly, but still have a decent amount of value, so I don't feel the need to close them at this time.

I am considering:
a) opening BPS at a higher strike, like 780/680 (but I don't want to be too close to the money in case we get a post-earning drop);
b) opening BPS at the same or lower strike (but it doesn't seem worth it today given the low IV);
c) selling CC (but the chance of the SP continuing to rise on a strong earning beat is too high); or
d) doing nothing.

Given that I don't see a trade that I am comfortable with at this time, I'm choosing option d. I will likely re-visit option b if we get a pullback or a spike in IV prior to close on Wednesday.

I can't believe we're having this conversation... the air is starting to get thin at these rarified altitudes...

But a 680/780 spread is very nearly 10% OTM! Sure, there may well be a sell-the-news... but could it really be 10% if the financials are anything like what the bulls are predicting? Q4 is only going to be better, and at some point it just becomes too good a deal to pass up! I'll be buying if we revisit $800, in any case.

That said, I completely understand anybody who wants to stay 15% or more OTM on earnings week. There's no volatility like the present.

 

[MikeC]

Rolled -p700/+p600 to -p750/+p650 and sold some CCs -c900 and -c950. Also added a few BCS -c930/+c1030.

 

[BornToFly]

But a 680/780 spread is very nearly 10% OTM! Sure, there may well be a sell-the-news... but could it really be 10% if the financials are anything like what the bulls are predicting?

With all the Sell-the-news earnings we have had in the past, there could be a lot of nervous trigger fingers Thursday that start selling to lock in profits as soon as the SP starts to dip. Add in Short sellers piling back on, and a 10% drop on great earnings is very possible Thursday. Hopefully an end of the week drop would correct next week.

 

[ggr]

I've got a lot of levers to pull. I'll deposit cash before I cash out those shares one month before long-term cap gains (after that, I don't care). I may also sell another group of stocks in the account, sell a covered call, etc.

It sounds to me like, with the rise in price of TSLA, you have become "overconcentrated". This causes them to reassess the margin rate just for you. The way out of this trap is to buy other stock, which you can't do because of the call... so you need to call the broker and tell them that you'll buy other stuff to reduce the concentration in TSLA. You said you had plenty of margin before this revaluation, so they should believe you.

 

[bkp_duke]

I am conflicted about how to trade this week. Last week, I opened some BPS for 10/22 (720/620) with about half of the margin that I want to use in a week. Those are up significantly, but still have a decent amount of value, so I don't feel the need to close them at this time.

I am considering:
a) opening BPS at a higher strike, like 780/680 (but I don't want to be too close to the money in case we get a post-earning drop);
b) opening BPS at the same or lower strike (but it doesn't seem worth it today given the low IV);
c) selling CC (but the chance of the SP continuing to rise on a strong earning beat is too high); or
d) doing nothing.

Given that I don't see a trade that I am comfortable with at this time, I'm choosing option d. I will likely re-visit option b if we get a pullback or a spike in IV prior to close on Wednesday.

Not advice, but 780/680 is flying too close to the sun for me. I'm expecting a "sell the news" after earnings, and will be pleasantly surprised if it doesn't happen.

 

[tradenewbie]

same same here, so tempted to do a BCS (-950/+1050), but I would rather do nothing now and tell myself not to be greedy, at least for today.

And in order for me not to do anything, I just don't open up the IBKR

 

[bkp_duke]

It sounds to me like, with the rise in price of TSLA, you have become "overconcentrated". This causes them to reassess the margin rate just for you. The way out of this trap is to buy other stock, which you can't do because of the call... so you need to call the broker and tell them that you'll buy other stuff to reduce the concentration in TSLA. You said you had plenty of margin before this revaluation, so they should believe you.

Well, it's not just me (see above), but point taken. It does re-emphasize my "cash is king" viewpoint if I am going to continue doing BPS week in and week out.

 

[TheTalkingMule]

I haven't looked at premiums, but with everyone complaining about IV being down.....how is any move worth it right now? I could easily see us squeezing higher after earnings, and easily see us tanking back below 800 if MM's really really really wanted to. There's no way to predict how the algobots will react at such an inflection point in the Tesla S-curve.

 

[bkp_duke]

I haven't looked at premiums, but with everyone complaining about IV being down.....how is any move worth it right now? I could easily see us squeezing higher after earnings, and easily see us tanking back below 800 if MM's really really really wanted to. There's no way to predict how the algobots will react at such an inflection point in the Tesla S-curve.

This is why, unless I have to close my position to cover that margin call, I'm going to hold it until Wed afternoon and let theta do its thing. Then there will probably be some IV increase after earnings. Not advice.

 

[ammulder]

LOL, last week I felt like a bear for saying it was looking like a good lead-up to a sell the news... this week I feel like a bull for saying the sell the news shouldn't be more than $60! Like, not more than sixty/six-zero! Is that too much to ask?

Anyway, first thing this morning I rolled up my 680/730 put spreads to 735/785 for $2 each. Pretty much all the weeklies I have open are at a point where I'd be OK closing them now, but I figure I'll close out tomorrow or perhaps more likely Wednesday -- definitely before the earnings release.

The big question, then, will be what to open for next week. You might yet talk me down a bit on that one.

 

[strago13]

I closed my 10/22 BPS 695/595 and opened 10/22 740 puts instead. That is as close to the sun as I want to get. My hope is to close it out Wednesday before earnings and then see what happens. I am also expecting a sell the news event.

 

[Cherry Wine]

Alright, I’ll bite - 30x 10/22 950s at 0.77.

To everyone wanting a better entry on your BCS/CCs: you're welcome. Still feeling pretty good about these though, and opened up some 1000s this morning.

 

[charlesgres]

With all the Sell-the-news earnings we have had in the past, there could be a lot of nervous trigger fingers Thursday that start selling to lock in profits as soon as the SP starts to dip. Add in Short sellers piling back on, and a 10% drop on great earnings is very possible Thursday. Hopefully an end of the week drop would correct next week.

Seems to me looking at past news events that the selling started already on the same day before the event.. So I would rather get out of the position Wednesday morning..

 

[chiller]

I'm trying to dip my toes into option selling; -740p/+540p for 10/22

 

[BornToFly]

I've been thinking about Fidelity changing their Margin on TSLA shares to just 40%. Maybe they aren't being evil. Maybe they are trying to protect clients who are using too much of their new margin as the SP climbs. Fidelity might be thinking that if there is a dip, those people will be in trouble. If they reduce it to 40% now, and then increase it back to 60% after a big drop, then they actually helped the gamblers not lose their house....

 

[tradenewbie]

Interesting comparison between TSLA and Apple stock movement

 

[Yoona]

volume so far is on p750 p800 c860 c900

 

[juanmedina]

I sold some 940cc's at $2.75 I am ok with losing my shares at that price in the mean time.

 

[BornToFly]

volume so far is on p750 p800 c860 c900

Must.... resist.... call premiums....

 

[samppa]

It's tempting to roll my big bps position from -750/+700 to -800/+750.. but I'm gonna resist this temptation.

Instead I rolled my little 2x BPS -760/+710 to 2x -850/+800. This is my intentional "trying to get myself into trouble" -position, that I've been rolling along. It started some weeks back as 1x -785/685, short leg went itm, position was rolled out a week and to -760/660, then I doubled contracts and cut position to -760/710, and now it's sitting at 2x -850/800.
Credit colleced so far from this experiment has been $3330, max loss stands now at $6670 (10k-credit).
Let's see what sort of salvation techniques will be needed on thursday's sell the news...