JusRelax
Active Member
Anybody know why they are called put to call ratios instead of call to put ratios? I'd like to think of it as a sign of how bullish investors are, and IMO, a higher number for more bullishness makes more sense.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
10k is plenty to sell an Iron Condor. I was doing that in one of my IRA accounts with a low cash balance and still making like 1-2k per week. It snowballs fast, but it's a little risky using the entire account like that.
Options are very risky and extremely sophisticated. Folks in this thread might make it look easy but believe me options are not for everybody.
It really depends on your family’s risk profile. I would never suggest options for anybody who is a newbie and wants to learn. First off please read the first posts of this thread before you do anything else.
The best strategy I would suggest is LEAPS which can act as alternatives to owing stocks but still are more riskier than just outright owning stock. Good luck.
Cheddar flow, they have a really nice platform.
Haha I know you are joking but obviously this is not WSB money.
jeewee3000
Active Member
Poster asks about basic options strategies.
@ammulder offers Iron Condors.
How far we've come
.@scubastevo80 : I started out with options around May 2021 with a similar amount (around $20k) and sold BPS at safe distance for 1%-5% per week (and sometimes +10%). Of course the SP went from $550 to $1050 in that timeframe so I rarely got in sticky situations. By being really safe a return of 1-3% every two weeks is very doable IMO.
If you cannot sell spreads, then there is little you can do given the high $ value of the TSLA stock. Very basic strategy with those funds could be to wait for a huge (and I mean huge) dip and pick up one LEAP close to the bottom. (I'm talking one or two truly red weeks, where TSLA has dropped even after some have called the bottom. A bit like when we hit $550 last May). Then you wait for the next ATH and sell the LEAP. It takes patience and time, but that way you can let the money work for you and have higher returns on it than just HODLING stock with the cash.
Or you buy one shorter term call (a few months) and sell calls against it weekly (with a higher strike price than the call). This nets you weekly low profits and with some luck your shorter term call gains huge value.
Last night I was a bit nervous about the 11/5 $870-970 put spreads I sold while the stock price was overly high yesterday. Just now I was able to buy them back for a few cents per share profit. Looking at the stock price in the $1060s again I am still pretty confident in staying above $970... but stress reduction is worth something too. Now just waiting for a bit of a dip to sell back lower.
scubastevo80
Member
Thanks - I just closed out two leaps (a June22 $1300 and Sep $1600) for the parents on Monday at the open. The $1300 position tripled, but is now up double what I closed it at and the other position was closed at a 25% gain. I was obviously caught off guard by the 10%+ run from Monday's open and now am likely to sit out a bit.Poster asks about basic options strategies.
@ammulder offers Iron Condors.
How far we've come
@scubastevo80 : I started out with options around May 2021 with a similar amount (around $20k) and sold BPS at safe distance for 1%-5% per week (and sometimes +10%). Of course the SP went from $550 to $1050 in that timeframe so I rarely got in sticky situations. By being really safe a return of 1-3% every two weeks is very doable IMO.
If you cannot sell spreads, then there is little you can do given the high $ value of the TSLA stock. Very basic strategy with those funds could be to wait for a huge (and I mean huge) dip and pick up one LEAP close to the bottom. (I'm talking one or two truly red weeks, where TSLA has dropped even after some have called the bottom. A bit like when we hit $550 last May). Then you wait for the next ATH and sell the LEAP. It takes patience and time, but that way you can let the money work for you and have higher returns on it than just HODLING stock with the cash.
Or you buy one shorter term call (a few months) and sell calls against it weekly (with a higher strike price than the call). This nets you weekly low profits and with some luck your shorter term call gains huge value.
Given the IV run up, I'm not going to be buying LEAPs, and I'd be happy to sell calls (if I could in my accounts) or a put for the family, but we don't have the cash to pay for 100 shares if assigned. Ugh.
I also can't watch the stock movements all day so these market maker tactical strategies probably aren't for me.
Well... if you were comfortable with the risk/reward of, say, an $800 put. You could sell an $800 put and buy a $700 put on the same trade ticket, requiring a total of only $10K backing cash. It would be no riskier than the put you originally contemplated, and would limit your maximum loss to the $10K backing cash (instead of the $80K max loss on just an $800 put). This is because once the stock price falls below $700, you can use the $700 put you bought to produce the 100 shares you need to cover the $800 put you sold. However, you'd reach that $10K max loss if the stock fell to $700 and stayed there. I'm not sure that's really different from the plain $800 put, which I think would also be looking at a loss on the order of $10K if the stock price went to $700. (It does become different if you sell 8x spreads instead of 1x plain put with $80K of backing cash, however.)
So, you can pick a put price you're comfortable with, sell it and buy one for the same date at a strike $100 lower, and pay just as much attention to it as you would a plain put at the strike price and date of the sold put. You'd make whatever income you make depending on the strike, and repeat as often as your calendar preference allows.
So I kind of feel that the "market maker" put spread strategy should be on the table if the plain selling-a-put strategy is. Just don't sell multiple spreads if you don't want to increase the risk (the rate-of-loss-if-stock-goes-wrong) over a plain put.
You and I have similar stories. I sold the 1000/1050 last week when I thought there was no way we were climbing another 10% after climbing something like 7% for a new ATH. I also suffered huge losses. I took my final losses this morning for a roll I had made to next week 1100/1150. All in all I lost 3-4 months worth of income, and I'm pretty spooked going forward (don't know if I can risk this again).
As far as I can tell, spreads and iron condors can really hurt you, because you can't roll to a much higher strike like you can with regular puts and calls. This leaves you with two options in the future that I plan to use.
1) Sell spreads that are REALLY safe on Mondays (not before the weekend that gives you two more days of exposure to black swan events) - 25-30% OTM for small premiums, and don't worry about them.
2) Sell more aggressive spreads, but as someone else mentioned, close them out as soon as they show a 100% loss, and fight another day, so you don't get a 1000% loss. I think this works best if you have an iron condor and balance the revenue of the put spread and call spread, so that when you close the losing side, you are basically at 0 gain/loss for the week on those contracts.
I am going to probably try using my funds for 80% in plan 1, and I will try 20% in plan 2 (to see how closing with a 100% loss) works out over time. I just need to figure out how I can put a stop loss order in for a spread in Fidelity. It seems like I can only do it for individual legs in the spread, which doesn't work very well since the two legs move differently.
Someone please correct me if anything I wrote is wrong.
You are incorrect. IF you just sell the 800 put, and it get assigned, you own the shares, and still own them below 700. When the stock recovers, you are whole again. When you do the spread, when it hits 700, you have lost all your money permanently and you own nothing. You never get it back, even if the SP climbs again. That is the problem with spreads.
Newly starting BPS and BCS.
How are you people adjusting for the following possible outcomes that may arise shortly? I am thinking of keeping 15% gap on both BCS and BPS until some of this comes to fruition:
Stock up
How are you people adjusting for the following possible outcomes that may arise shortly? I am thinking of keeping 15% gap on both BCS and BPS until some of this comes to fruition:
Stock up
- EV credit 99% probability
- New announcements similar to Hertz or new vehicles like vans (carriers will love them)
- $25K car announcement
- Wealth tax 50% probability
- Shortages/ supply chain issues 50% probability (TSLA seems to navigating it well)
If you start reading this thread from Monday morning (YOU NEED TO DO THIS), a 15% gap is not enough, especially after a big run up like we just had. Trying to predict probabilities of what might make the stock go up of down in the short term will wipe you out, because the market is not rational in the short term. The stock price doesn't need to get up to the short leg to wipe you out if it happens early in the week. If you sell a spread for $1, it can turn into a $20 loss without hitting the short leg, because the short leg increases in value much faster than the long leg. If you keep holding because you think the SP will reverse, and it doesn't, you now have a maximum $50 loss on a $50 spread for your $1 of income. I probably averaged a $10-15 loss per spread (out of the possible $50), but because it happened on all my spreads (2,600 of them), I took a roughly $3,000,000 loss in three days.
pz1975
Active Member
I notice a lot of new people posting about starting spread strategies. I think that was inevitable after the months of success many of us have had here and with results easily followed in this thread. I just want to add a word of caution to anyone who is new to this: start very small and very conservative (stay very far from the strike price and using only a small amount of your margin or cash). Also consider starting using just sold puts and covered calls and not spreads.
I started routinely selling options a couple years ago (previously only did it before ERs) and at first only sold very OTM puts (no spreads) and covered calls, and even doing that made mistakes early on and was lucky I was being so conservative. I also had 6 years or so of buying calls (short-term to LEAPS) prior to that so I understood options reasonably well. If I had just jumped in the deep end when I started selling options using spreads I would have been drowned very early. Even now I know that at any moment it is possible for me to lose all my margin I am using and so I am super careful to avoid this.
I started routinely selling options a couple years ago (previously only did it before ERs) and at first only sold very OTM puts (no spreads) and covered calls, and even doing that made mistakes early on and was lucky I was being so conservative. I also had 6 years or so of buying calls (short-term to LEAPS) prior to that so I understood options reasonably well. If I had just jumped in the deep end when I started selling options using spreads I would have been drowned very early. Even now I know that at any moment it is possible for me to lose all my margin I am using and so I am super careful to avoid this.
I’d like to echo this statement. If you’re just getting started into writing options contracts, I’d avoid starting with spreads. Other opportunities with spreads will present themselves and it’s better to be well prepared for those than to be unprepared because of FOMO.
Is that necessarily true (lost all money and own nothing)?
If you have the $80K backing to begin with and you sell an $800 put and buy a $700 put and the price goes to $700, you could take assignment on the $800 and just sell the $700 at a now-increased price, and between that and the original premium, make up some of the difference between current stock price and the 800s you took assignment on. Then if the stock price goes back up you still have shares, though compared to a plain $800 put it would have cost you the elapsed time value on the 700 I guess.
You're right that if you only have the backing cash for the spread you can't walk out of a bad situation with 100 shares... but then it's kind of apples to oranges to say spreads are worse because a regular put was never an option. If you had the $80K backing and sold multiple spreads and it went bad, then you're looking at a much worse situation, but leverage via multiple spreads was not the situation I was describing.
Still, you are all making a valid point that spreads are probably not a great place to start one's options journey. (Do you have another proposal for how to make some income on $10K in cash?)
To take assignment on 800 strike Puts you need $80,000 to back each contract. The reason people are using spreads is because you only need $5000/contract on a $50 spread. If you have the $80,000 to back all the contracts you want to sell, there is no reason to do a spread - you are giving away premium each time.
Knightshade
Well-Known Member
IV going up? Just saw a ~$20 price jump in SP but my unrealized sold puts profit dropped about 50 cents a share
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