Wiki Selling TSLA Options - Be the House

[bkp_duke]

along the lines of this question, i see tsla at 49% IV on thinkorswim. but it appears each options strike has its own IV as well. Seems to be a big discrepancy on what the IV is, anyone know which is right?

There is an IV for the stock, and for each option that is traded. I guess we should all be specific when we say IV is at X% about exactly what we are talking about, and about what time frame. Currently for TSLA stock, IV is at 4% compared to the past 12 months.

 

[jeewee3000]

There is an IV for the stock, and for each option that is traded. I guess we should all be specific when we say IV is at X% about exactly what we are talking about, and about what time frame. Currently for TSLA stock, IV is at 4% compared to the past 12 months.

Yes this confuses me (and frustrates me) so much. IV is such a vague term to just blurt out.

 

[juanmedina]

IV30 of the stock is 36 and a $700 10/22 put has an IV of 132% the same put next week has an IV 85%

 

[Knightshade]

If you are going to buy some calls to hedge, maybe go out another week. The other option is just sell covered calls for 880 so if the SP drops you keep the premium and don't lose the shares. If it goes up and you lose the shares, sell Puts to get them back. I wish I had an IRA. Taxes in regular accounts prevents me from playing these profitable games.

Well, I'd prefer to have shares back by Friday ideally...

My thinking is if I go to cash, then sell $850 puts and buy $950 calls for this Friday:

Any sell the news the puts execute and I get back slightly more shares than I started with, plus about $12.50/shr net premium.

If the stock shoots way up on the news instead the profit on the $950 friday calls, plus the premium on the puts, still likely gets me back into more shares than I began with.


Changing the $950 calls to 10/29 drops my net premium nearer $10/shr... though I guess it does give me more upside if we get a "sell the news Thurs/Friday, but pop next week as market absorbs said news"... Hrm....

Course as I've been speculating SP climbed from 863 to 867 so there's that....

 

[InTheShadows]

along the lines of this question, i see tsla at 49% IV on thinkorswim. but it appears each options strike has its own IV as well. Seems to be a big discrepancy on what the IV is, anyone know which is right?

You are seeing the atm iv. Each option has its own IV. The further OTM you go the larger it gets.

4% sounds like iv percentile or historical.

 

[mongo]

Whacky IRA idea predicated on sell the news happening-

Sell shares at $863ish, use cash to sell $850 10/22 puts at around $13.50-14/sh.... get back slightly higher # of shares plus the premium if it dips.

Could even hedge a huge climb by buying some $950 calls for 10/22 for like 10% of the premium received on selling the puts.

Dumb?

Watch out for the settlement time on the cash from selling the stock. A put buy today sell tomorrow would be a violation (unless you have a level 2+ margin enabled IRA)
[Edit, selling puts (original message) is different, corrected below]

 

[mickle]

It seems to me like many people are unnecessarily closing positions that are very unlikely to be a loss with only 1 or 2 DTE. If you are on margin and playing it safely, by say, using <40% of it, then I see no reason to close or roll a position even if it is up 90%. Just use more margin for that extra day or two for new positions, let your old positions expire, and make more money. It seems to be almost impossible to close a BPS before expiration for the full credit, there always seems to be some value left in them. So better to let it expire.

 

[Knightshade]

Watch out for the settlement time on the cash from selling the stock. A put buy today sell tomorrow would be a violation (unless you have a level 2+ margin enabled IRA)

Not sure I understand- I'm not planning to buy puts at all.

Plan was:

Sell 890 shares today
Sell 9 $850 puts for 10/22 today
Buy 9 $950 calls for 10/22 today.

If SP is <850 on Friday the cash from the share sale covers executing the puts (this can be unsettled cash just fine, it's only a good faith violation if I buy with unsettled cash and then sell what I bought before the cash settles- that's without margin in IRA (which I don't have and my broker does not even offer).

 

[mongo]

Not sure I understand- I'm not planning to buy puts at all.

Plan was:

Sell 890 shares today
Sell 9 $850 puts for 10/22 today
Buy 9 $950 calls for 10/22 today.

If SP is <850 on Friday the cash from the share sale covers executing the puts (this can be unsettled cash just fine, it's only a good faith violation if I buy with unsettled cash and then sell what I bought before the cash settles- that's without margin in IRA (which I don't have and my broker does not even offer).

Whoops, yeah my mistake (gotta remember this is the sell options thread). Option settle in one day I think so buying back on Friday would be ok, if you wanted (from a put cash perspective).
The calls would be problematic to sell back early though.

 

[pz1975]

It seems to me like many people are unnecessarily closing positions that are very unlikely to be a loss with only 1 or 2 DTE. If you are on margin and playing it safely, by say, using <40% of it, then I see no reason to close or roll a position even if it is up 90%. Just use more margin for that extra day or two for new positions, let your old positions expire, and make more money. It seems to be almost impossible to close a BPS before expiration for the full credit, there always seems to be some value left in them. So better to let it expire.

I agree with this. I usually let all my positions go to the last 30 mins before close Friday where I can close them for pennies. Until I want/need to free up margin for my trades the following week, I don't like throwing away those last few $thousands of profit.

 

[bkp_duke]

Bulk of my positions just closed at 92% of the premium. I'm happy with that.

Look forward to the earnings call later today, hopefully we get some insight onto when TX and Berlin start cranking out cars for sale.

 

[MP3Mike]

Plan was:

Sell 890 shares today
Sell 9 $850 puts for 10/22 today

Will they let you sell puts against unsettled cash? If you buy the puts back before the cash settles it would still be a good faith violation. (At least I'm pretty sure that is what nailed me in one of my IRAs.)

 

[corduroy]

It seems to me like many people are unnecessarily closing positions that are very unlikely to be a loss with only 1 or 2 DTE. If you are on margin and playing it safely, by say, using <40% of it, then I see no reason to close or roll a position even if it is up 90%. Just use more margin for that extra day or two for new positions, let your old positions expire, and make more money. It seems to be almost impossible to close a BPS before expiration for the full credit, there always seems to be some value left in them. So better to let it expire.

I have been experimenting with this exact strategy regarding closing positions in the last month - I haven't closed any of them early. I try to maximize profits by holding my winning positions until expiration AND opening new positions for next week, by utilizing excess margin.

For example:

Say by Thursday I am at 40% margin utilization, with current weekly positions at 80% profit with strikes not in play for Friday. I open my new positions that I want to carry over to next week (instead of closing or rolling ), bringing me up to 80-90% margin, but only for a 2 day overlap period. Friday comes, the current week spreads expire at 100% profit (close for pennies), then I carry over around 25% margin utilization over the weekend (a level I am comfortable with).

If some major drop happened on Thursday or Friday during the overlap that brought a margin call, I could close the positions that were about to expire anyways, and be in the about same position margin and profit wise that I would have been if I would have rolled them to the new next week positions. But these are far OTM positions, so unlikely.

In doing this, I've been able get an extra 20% every week from not closing at 80%.

 

[Yoona]

It seems to me like many people are unnecessarily closing positions that are very unlikely to be a loss with only 1 or 2 DTE. If you are on margin and playing it safely, by say, using <40% of it, then I see no reason to close or roll a position even if it is up 90%. Just use more margin for that extra day or two for new positions, let your old positions expire, and make more money. It seems to be almost impossible to close a BPS before expiration for the full credit, there always seems to be some value left in them. So better to let it expire.

i will probably bring my IC to Friday; shorts are >10% away per side

 

[Drezil]

Since IV hasn’t really risen that much are we still expecting an IV crush tomorrow morning? Maybe 50 to 47 or 45 at the most?

IV is different for each expiration.
It is the expected change implied by the options market (sigma or stardand deviation) for calls & puts (they differ!) and volatility in the underlying. This is then annualized(!) to make it comparable.

Currently IV for friday sits at 62%. Vega of an Option is the change in Option price for change in IV.

The closer we get to expiry, the more IV collapses, as the uncertainty until friday gets lower and lower. Normally we have IV in the 20s on friday morning. I expect a collapse from 66% at open today down to ~35-40% on open tomorrow.
So think in your options what a -25*vega will do for your options prices (ONLY for the expiry on friday).

Best way to capture this: ATM short Straddle, small IC. Open today, close at open tomorrow.
COULD be a safe play if you believe that the MM will keep the stock below e.g. 900 until friday. I won't bet on that - i only play the BPS side of it with a safe distance. I have 820/720 BPS open, 950CCs, etc.

 

[Knightshade]

Will they let you sell puts against unsettled cash?

AFAIK I can use unsettled cash for anything, but I can't sell anything I buy with it before the cash settles.

If you buy the puts back before the cash settles it would still be a good faith violation. (At least I'm pretty sure that is what nailed me in one of my IRAs.)

That is correct, but I wouldn't buy them back regardless.... I'd either let them execute (increasing my # of shares owned by 10 plus pocketing about $12/share from premium) or let them expire worthless.


I think the only range where this idea really loses is if the SP is in the roughly $870-900 range on Thursday... (higher than that 950 calls would get me enough gain to get back into 900 shares I believe possibly with some cash gravy on top).... bumping the bought $950s to 10/29 might as suggested be a further, better, hedge on a climb too...

 

[mongo]

Will they let you sell puts against unsettled cash? If you buy the puts back before the cash settles it would still be a good faith violation. (At least I'm pretty sure that is what nailed me in one of my IRAs.)

I've done that (sell shares sell puts same day) without a ding. Unsettled seems to be fine to back a put position and options settle in one day, so buying back for a gain on day two is okay if there was no cash to start with. If buying back requires the cash from the shares, it would need to happen on day three (after +2 settlement).
Sell shares, sell puts, get assigned, sell those shares would need to watch the two day settlement.

 

[stealthyc]

I've done that (sell shares sell puts same day) without a ding. Unsettled seems to be fine to back a put position and options settle in one day, so buying back for a gain on day two is okay if there was no cash to start with. If buying back requires the cash from the shares, it would need to happen on day three (after +2 settlement).
Sell shares, sell puts, get assigned, sell those shares would need to watch the two day settlement.

They may also let you do it, but you will get flagged for a good faith violation. If you get enough of those they limit your trading for a while.

 

[mongo]

They may also let you do it, but you will get flagged for a good faith violation. If you get enough of those they limit your trading for a while.

If they did flag, they gave no indication of it. I see no reason for a flag in this situation, do you?

 

[deerfield]

I have -860/960 call spread this week. Debating whether to roll by end of today or let it go over earnings. I'm still able to roll 2 weeks out to 870/970 for a $3 credit. Historical data is on my side that it'll be sell the news tomorrow. If that's not the case tomorrow and IV crush takes effect, it would be cheaper for me to buy it back right? I am assuming the IV crush is only for this week's expiry. In other words, if I have to roll, might as well take the chance and wait till the end of the week?