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Wiki Selling TSLA Options - Be the House

TheTalkingMule

Distributed Energy Enthusiast
Oct 20, 2012
7,787
33,574
Philadelphia, PA
My usual move for earnings is to go way OTM for the actual event, capture some IV crush post event, then when the inevitable slight drop happens on good news I go in big for the following week at a more aggressive strike.
Keeping in mind that up til now we've never shown a massive pile of actual earnings, a clear picture of more to follow, and a PE ratio lower than annual growth. We need to think of classifying 3Q and 4Q and something more substantial than the traditional "good news" that CNBC and others are open to interpret as something else.

This premium stuff has really reduced the stress watching the stock. I am no longer stressed, angry and upset about the stock not following macros on green days, or FUD in the media tanking the stock. Slow and steady wins the race!
Keeping in mind this is exactly the kind of rational predictable run that Wall Street like to avoid. Rock you to sleep with a steady climb or slow burn, then.......BOOM......a rocket or plummet. I think we're more likely than not going to boom or bust between today and 4Q earnings. Watching all these CCs get written worries me!
 

adiggs

Well-Known Member
Supporting Member
Sep 25, 2012
5,240
16,938
Portland, OR
reviously, when I had the margin calls, there would be a deadline for clearing it - of course with a warning that Fidelity could liquidate securities at any time to cover the margin call. With this Federal call, there is no such deadline listed - so would prefer to let the theta burn do its job till Thursday and then close it. @adiggs mentioned previously that they had a Federal call at one time - is there a penalty for not covering it quickly?
SERIOUSLY NOT-ADVICE
When I had my SMA call, I read in the Fidelity term definition that you have 5 days to meet the call. I covered it the next day but in retrospect I would like to have waited an extra day. There are rules around meeting the call; and then your broker has incremental ability to just say "*f... it; gimme your money" and resolve it. My own plan is that as long as the house margin is pretty generously above the SMA call, I'll use more of those 5 days. That'll get me closer to that cash:BPS ratio that maximum loss would suggest. And I also wouldn't push the max loss.

I.e. - I'll rely on Fidelity's good sense that the position is really safe - it's just an artifact of the calculation trouble might be brewing in that account, and not make use of their power to liquidate if they feel like it.
Also something to keep in mind is it takes one day for option trades to settle. And the Fed Call won't be met until the funds have settled. So that eats one of your days. (At least that is my understanding.)
My thinking (but I've got the good stuff from the ER right now) is that the 5 days Fidelity had in their definition and the 4 days you mention here are compatible. The extra day for the option / deposit to clear.

I doubt I'd leave an SMA margin call open for all of that time, but I might use more like 2 or 3 next time (and as long as SMA is < House surplus, there will be more next times).

My usual move for earnings is to go way OTM for the actual event, capture some IV crush post event, then when the inevitable slight drop happens on good news I go in big for the following week at a more aggressive strike.
This makes a lot of sense to me. *gets pen and paper* *scribbles notes*
 

mrmage

Member
Supporting Member
Jan 10, 2019
546
3,448
The Peninsula, CA
I am finding this strategy quite intriguing as well - let us know how it works out. My 2 cents - this might be a good strategy for those using cash covered trades, but not so much if using margin to cover. If we are using margin For DITM call debit spreads, you would be using the margin to pay for the debit premiums - so the margin interest will start accruing immediately. The slightly higher returns of the DITM debit call spread may be nullified by the margin interest.

I cannot try it this week - need to get out of that Federal Call that was triggered on Friday - so playing in that account is out. Still trying to figure out how bad is the situation with Fed Call and if it is OK to wait till Wed/Thurs to close out the positions. Fidelity doesn't have any information other than the ominous warning. Previously, when I had the margin calls, there would be a deadline for clearing it - of course with a warning that Fidelity could liquidate securities at any time to cover the margin call. With this Federal call, there is no such deadline listed - so would prefer to let the theta burn do its job till Thursday and then close it. @adiggs mentioned previously that they had a Federal call at one time - is there a penalty for not covering it quickly?

Current interest rate on margin is around 2% annually, but the difference between calls and puts is 4-6% weekly. I wouldn't worry about the margin interest for this.

But as someone else opined, the advantages for puts when done weekly is tighter bid-ask spreads due to higher trading volume, and closing contracts for calls (e.g. $0.65 for TD) costs more than letting puts expire, and there's some assignment risk which causes more work. If the profit per contract is $200 though, the $0.65 doesn't bother me. Lots of considerations.

I wanted to try 600/700 today, but max gain dropped quite a bit today. I'll try modeling this for intervals besides 1 week to see if there's something more lucrative.
 

generalenthu

Active Member
Supporting Member
Jun 10, 2015
1,300
10,977
Vienna, VA
I have seen some statistical analysis positing that IV continues to rise into earnings (generally speaking, not Tesla specific) starting from a week to 10 days before that. Apparently, this IV rise tends to fully offset the theta as we get closer to earnings. Fair warning: I believe this analysis was done on monthly expiries, but not weekly, which is the flavor du jour here. While I have not looked at any back test for this, I am in no hurry to close out this weeks spreads, which are actually trading from above where I sold at today's highest price just above 800, and lowest vol.

That said, I did open a small post earnings bps to check on the IV thesis. I see several have already legged into post earnings spreads here. Would be good to see how these evolve rest of this week, into earlier next week.
 

M3Rider

Active Member
Supporting Member
Oct 3, 2018
1,546
7,834
CO
STO 5x $820 and $825 when it touched $798 and then $800, wish I had closed out my puts from last week at the same time, but they are holding at 50% profit right now (did 8x $750 @$11.44). I'm not touching 10/22 expiry yet. Waiting for price action to see how the call walls hold this week and if new OI appears for next week. My guess is that we'll do ~$2.00 EPS and it will pop the stock, if above $830, I don't want to be caught in the retail buying madness.
I would think that retail is loaded up and has no change to spare. Those types that think TSLA is expensive and are waiting for a discount will not be buying on the pop either. Day traders might jump in.

If we get any volume, it should be from institutions. Those benchmarked to S&P underweight TSLA PMs that Gary Black talks about.
 

dc_h

Active Member
Feb 14, 2015
3,573
13,596
Naperville, IL
Damn, I just can't help myself, STO 200x 22/10 600/685 +$6 🤪
That's why I don't log on, I know I'll do something. That is a great premium though, I think there are big positions hedging in case of an earnings miss and its a small lose for them and a big payout for us. Except for a major macro issue, or Elon retiring, NHTSA finding against Tesla FSD and probably 2 of 3 of those happening to go seriously below 690.
 
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BornToFly

Active Member
Supporting Member
May 8, 2013
2,251
17,626
43,000 feet
That's why I don't log on, I know I'll do something.
That is the problem I have if I sit at home on the computer. I'm trying to trade once a week, and enjoy the money the other days. But there is a sick part of me that feels the need to look at it constantly and find more trades. Maybe we need to start a support group....
 

Discoducky

P100DL, 2021 M3, 4 CT reservations and counting
Supporting Member
Dec 25, 2011
3,905
9,286
My mountain
My usual move for earnings is to go way OTM for the actual event, capture some IV crush post event, then when the inevitable slight drop happens on good news I go in big for the following week at a more aggressive strike.
This is with BPS's? I do similar with just puts and watching levels of resistance and max-pain put walls. I used to buy calls, but was burned twice and the puts saved me (aka, hide behind a big put wall...+10% buffer)
 

Yoona

NEWBIE Trader
May 3, 2017
580
3,468
Canada
A few posts about risks, tolerances, big losses etc., I think there's a lot to be said about not betting the farm every week, as @Yoona's post pointed out, a modest commitment can bring big gains and winning 99/100 as opposed to 9/10 will be a much more comfortable life overall, with plenty of money

As I have $2.3 cash for spreads, I'm thinking to just bet 50% of it on something a little more modest. Yes I can do $100k weeks, but it's not necessary

Another approach can be to trade every other week - wait for the dip, take the fat premium and let the whole thing expire...
yeap, not being greedy is one key to success

although i am up 22 out of the last 24 weeks, the last 5 is when i was less reckless with margin (ie results became somewhat predictable and consistent)
1633990990066.png


this is the very first screenshot i took from the optionsalpha video when i first started and it's still on my office wall:
1633991389914.png


 

InTheShadows

Active Member
Apr 20, 2013
2,391
2,040
USA
I sold some LCC and CC 835’s today for this week. I bought them back for a loss an hour or so later when the share price started to head for 800 again. I just don’t have the stomach for short calls right now. 30 mins prior I tried to create an IC too and it was rejected. (Still not sure why, it matched my put spread exactly). I’m glad it didn’t go through.

All my put spreads closed near open at 50% gain. I was pissed. I was driving when they triggered and realized I was so busy this am I forgot to move them to 80% orders before I left for work.

I reopened most of them, all with the short legs at 745 (one at 735) which was a bit under 1 std deviation when I opened them. They are pretty much flat for the day right now.
 
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EV forever

Member
Supporting Member
Apr 23, 2016
833
6,362
Irvine, CA
I am surprised to see the number of posts today saying that they already closed positions for this week and opened for next week which is post IR. Wouldn’t it be better to wait until later to open new positions as you would expect IV to be higher closer to IR. For those who already had 80% profit on the positions this week, I can understand. But many others are already rolling out to 10/22 and it is just Monday! What am I missing here?

My positions for this week are only about 30-40% in profit, normally I would wait till about 75% to close. So no changes today.
 

InTheShadows

Active Member
Apr 20, 2013
2,391
2,040
USA
I am surprised to see the number of posts today saying that they already closed positions for this week and opened for next week which is post IR. Wouldn’t it be better to wait until later to open new positions as you would expect IV to be higher closer to IR. For those who already had 80% profit on the positions this week, I can understand. But many others are already rolling out to 10/22 and it is just Monday! What am I missing here?

My positions for this week are only about 30-40% in profit, normally I would wait till about 75% to close. So no changes today.
Mine are for this week.
 

MikeC

Active Member
Supporting Member
Jul 9, 2012
3,047
7,130
Los Angeles
I am surprised to see the number of posts today saying that they already closed positions for this week and opened for next week which is post IR. Wouldn’t it be better to wait until later to open new positions as you would expect IV to be higher closer to IR. For those who already had 80% profit on the positions this week, I can understand. But many others are already rolling out to 10/22 and it is just Monday! What am I missing here?

My positions for this week are only about 30-40% in profit, normally I would wait till about 75% to close. So no changes today.

I closed mine at 70+% - if the SP keeps going up into next week, even if IV goes up, I’m thinking the price of the 10/22 puts won’t necessarily get better. So I’d rather sell 700s earlier than 750s later. I sold half my alotted number of contracts to see which way turns out better.
 
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Playing around with cheddarflow, and wow, I knew TSLA had an active options market, but I had no idea to what extent compared to other companies. If I'm reading the data right, we were the top options market by a factor of 2 last week:
1634002941138.png


What makes me think I'm reading this wrong is that I don't see the SPY, QQQs, etc. on this. So I guess it's just individual stocks that we're ruling. Also, not sure if this is unusually high or not due to earnings.
 

Yoona

NEWBIE Trader
May 3, 2017
580
3,468
Canada
I am surprised to see the number of posts today saying that they already closed positions for this week and opened for next week which is post IR. Wouldn’t it be better to wait until later to open new positions as you would expect IV to be higher closer to IR. For those who already had 80% profit on the positions this week, I can understand. But many others are already rolling out to 10/22 and it is just Monday! What am I missing here?

My positions for this week are only about 30-40% in profit, normally I would wait till about 75% to close. So no changes today.
i moved half to next wk, and the remaining half i am undecided
 

M3Rider

Active Member
Supporting Member
Oct 3, 2018
1,546
7,834
CO
I am surprised to see the number of posts today saying that they already closed positions for this week and opened for next week which is post IR. Wouldn’t it be better to wait until later to open new positions as you would expect IV to be higher closer to IR. For those who already had 80% profit on the positions this week, I can understand. But many others are already rolling out to 10/22 and it is just Monday! What am I missing here?

My positions for this week are only about 30-40% in profit, normally I would wait till about 75% to close. So no changes today.
It seems to me some who close early in the week also open them earlier than Friday, i.e. positions might be sitting closer to a week and gained more than positions opened on Friday.

I'm wondering if someone made an observation that positions opened for 2 weeks ahead and closed 1 week later consistently earn more than weekly positions? Probably give you more leeway as to when to close them, can wait out some bad days? On the other hand the premium for 2 weeks should be less than 1 week ×2. But maybe if you close a week early you can get 60% of premium? I've thought about this, but have not yet tried to track the numbers.
 

Criscmt

Member
Feb 18, 2020
545
1,781
San Francisco

Your brokerage should just calculate wash sales automatically. You should be able to export your trades to an Excel file from your brokerage website. My CPA just writes "Various" for my trades and then just uses the overall gain/loss numbers.
The problem is with me having multiple accounts across which I bought/sold TSLA around the same time.
This affects Wash sale calculations.
 

Lycanthrope

S3XY old dude
Supporting Member
Nov 15, 2013
10,226
80,995
At home
I am surprised to see the number of posts today saying that they already closed positions for this week and opened for next week which is post IR. Wouldn’t it be better to wait until later to open new positions as you would expect IV to be higher closer to IR. For those who already had 80% profit on the positions this week, I can understand. But many others are already rolling out to 10/22 and it is just Monday! What am I missing here?

My positions for this week are only about 30-40% in profit, normally I would wait till about 75% to close. So no changes today.
I closed out this week's as the profits were already ~85%, I think this was a good decision

As for opening already for 10/22, well, who knows, but after a couple of hours I could have already taken $26k profits (but didn't after last week's experience). Although IV popped later in the day, the long leg went higher by more % than the short, so, well I don't know. The only thing I don't like is spending the extra time in the trade

And then there's the part of me that has to be in a trade or I think I'm missing out - this is the hardest aspect for me to control and maybe the key to more consistent success going forwards
 

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