Wiki Selling TSLA Options - Be the House

[adiggs]

Looks like we are in the same incoming class.

Started on the put side with also 70-80k cash. Targeting 20-30% SP buffer for strikes. At this point, no margin and not looking to get into spreads. My goal for now is to not fat finger an order and just beat the banks rate. Good problem to have but should start thinking what if SP goes higher and my cash starts to lose power(keeping with my 20-30% guide) in writing puts.

On the non-tax account, started with a far OTM 1700 C for 11/5. I will start to go down in strikes after more visibility into this new SP 1000 world.

This is a great place to start, and a great attitude for getting started.

Learn the mechanics, get some experience with what's going on (amazing how having some skin in the game increases the learning rate and quality), and then you'll have some actual knowledge and experience to make informed decisions (can you really beat the bank rate? can you beat the dividends from a safe dividend payer? etc..)


My experience with cash secured puts against a fast rising share price was that (1) I WAS selling fewer and fewer puts as the share price went up as I couldn't afford to back as many and (2) my actual income was going up with the share price, even when I was selling fewer puts (the premium / contract was going up as well with the share price). So I expect that particular possible problem, to not be a problem for you.

 

[adiggs]

A stock split should solve that problem. I’m looking forward to being able to sell 4 or 5 times as many options with the same amount of cash.

This is one benefit of using put spreads. In theory one could always use $200 wide spreads (or whatever) and would therefore always have the same number of positions being opened.

In practice the spread size should widen as the share price goes up. I've just begun thinking about this but I like wide spreads that behave like short puts and I'm thinking about a $100 spread width for each $500 share price. So $200 wide spreads right now, moving up to $300 wide spreads around $1500 share price (you know - like for next week expiration )

 

[adiggs]

I think we'd be halfway down to $1000 today if it weren't for the Biden plan moving forward. If/When these two bills pass and are signed, look out....the moon is the limit.

Dave and his guest were certainly not expecting Biden to leave for climate summit with agreement in place. Seems the 3 senators are still balking a bit, but all indications are they'll fall in line. That's a huge deal relative to him having nothing done before COP26.

Hence I'm only sitting on a few way out of the money BPS. Literally anything could happen in the next 6 trading days.

This is one of the many reasons I like this thread so much. There's a useful idea here that I haven't put into my own thinking all that much.

I do have some 1200 cc for next week open right now (but definitely not call spreads) - I might not sell follow up cc afterwards, immediately. That decision will be mine of course, but the range of info coming from so many different people is of huge value to me.

 

[Nocturnal]

I’d recommend IBKR. Very reliable platform with a lot of trading tools and options trading for spreads etc.

I use them for my brokerage, but wasn't sure how the rules were in their IRA products. Will take a look.

 

[adiggs]

I've decided to offer up my 750/950 put spreads for .35 today. I haven't yet been taken up on that offer but we're getting close (currently .38). That'll be a ~80% gain and I like freeing up those resources for opening a new position for next week. With only .35 left to earn in the current position, I'd like to have $2-5 to earn in a new position.

In related news I have recently been selling $100 wide spreads. With this week's volatility and my corresponding uncertainty I switched to $200 wide spreads for this week. I think I've pretty much talked myself into using $200 wide spreads as my standard. That'll cut the leverage I've been using in half while still leaving p l e n t y of position size and stuff to reach my income targets. As the share price goes up the spread width will also need to increase in order to maintain the "behaves like a short put" action on these puts.

I'm thinking about $300 wide spreads as the share price gets into the 1200-1500 range. Not sure about that, and I also realize that IV will have a large impact on spread size as well (lower IV, smaller spreads). With these wide spreads they're really more like short puts with a distant insurance put to control the margin reservation.

 

[dc_h]

Just thought I would touch base with all my fellow option sellers. Has anyone else has a pretty rough week in terms of contract rolling? I probably should of just bought everything back when we broke 1000 but my stubbornness told me to roll instead since usually in these situations it is time to be selling calls not buying. As a result of my rolling I ended up paying a pretty heavy cost to roll my strikes up without moving my expirations further out.

Just wanted to see if anyone else is in the same boat and what your plays are?

I sold a few far OTM Puts which helped soften the blow, but I'm still down about 4% of my entire portfolio rolling options lol. Will probably take me months to get that back selling options.

Same here. Didn’t bail early. I’ve got 30 1000-1050 contracts. I’ve made up 1/3 of the loss with bps plays I closed yesterday and some otm covered calls. Is there really anything otm anymore?
Anyhow, I’m taking my queue from the Dave Lee gamma squeeze video and my personal stupidity. I’ll look for a roll tomorrow and today, if there’s a dip. I’m thinking I’ll add a bps condor to the trade to try to minimize my costs. The shift up is more than a gamma squeeze, it was driven by fundamentals and those will be reinforced going forward. It seems likely market makers will establish control again, but it may not be next week. Terrible macro news may still bail me out, but they appear to be tailwinds this week with budget deal likely tomorrow morning. The administration will want a full weekend news cycle. Worst case for me is full lose on 20 contract with 50 point spread. Not good, but less than my share gains.
Thanks @Yoona for some inspirational trading. I made 11 trades the last two days to reduce my losses. A bit of work to go.

 

[tradenewbie]

I've decided to offer up my 750/950 put spreads for .35 today. I haven't yet been taken up on that offer but we're getting close (currently .38). That'll be a ~80% gain and I like freeing up those resources for opening a new position for next week. With only .35 left to earn in the current position, I'd like to have $2-5 to earn in a new position.

In related news I have recently been selling $100 wide spreads. With this week's volatility and my corresponding uncertainty I switched to $200 wide spreads for this week. I think I've pretty much talked myself into using $200 wide spreads as my standard. That'll cut the leverage I've been using in half while still leaving p l e n t y of position size and stuff to reach my income targets. As the share price goes up the spread width will also need to increase in order to maintain the "behaves like a short put" action on these puts.

I'm thinking about $300 wide spreads as the share price gets into the 1200-1500 range. Not sure about that, and I also realize that IV will have a large impact on spread size as well (lower IV, smaller spreads). With these wide spreads they're really more like short puts with a distant insurance put to control the margin reservation.

What kind of BPS you have in mind for next week? I have been super conservative and only brave enough to do -720/+620 with $1 premium, sigh...

 

[adiggs]

What kind of BPS you have in mind for next week? I have been super conservative and only brave enough to do -720/+620 with $1 premium, sigh...

If i were to repeat the BPS I have right now, that'd be the +750p/-950p for next week. That's about 11.30 - 3.20 for an 8.10 credit. Pretty damn awesome for a single week, and about 4% using the $200 wide spread.

950 is .16 delta which is also a good level for my risk / reward view on things.

Pushing back to the 700/900 put spread I get 7.80 - 2.25 = 5.55 credit. Also really good at 2.75% for 1 week. Figure I close either way at 80% - that's not a target so much as an observation of how things have been going recently.

The 600/800 is 4.15 - 1.05 = 3.10. My reality is that is plenty of income for my portfolio and place in life and that is a whole lot of safety built in.


So for me - I think that the 750/950 is safe enough, but I also don't need to take on much risk at all. I probably end up at the 650/850 and a ~$4 credit, as I don't think that even $900 is in play for next week, but I also like me some extra safety net since I've proven to be constitutionally unable to leave very much cash / margin unused.

 

[adiggs]

What kind of BPS you have in mind for next week? I have been super conservative and only brave enough to do -720/+620 with $1 premium, sigh...

The super conservative bit - my first trade was 50% OTM ($200 strike when shares were close to $400). When you're getting started, I claim that your purpose isn't making money. Making money is a side benefit of gaining an education and experience. With education and experience you'll decide for yourself just how aggressive you want to get, and you'll have some personal knowledge and experience to draw on.

Also super beneficial - do you know for yourself what "enough" is? When I was working I defined "enough" in terms of wealth and concluded that a $4M portfolio was "enough".

In retirement I now define "enough" in terms of a weekly / monthly / quarterly income. With an idea of "enough" in mind, it's easier (at least for me) to stop pushing the envelope / being too aggressive if I achieve "enough" with less aggression. Part of the optimization going on here isn't just income / financial results - it's also risk level, effort level, stomach acid, etc.. The whole package deal needs to work for you and when you're starting, that means trades that you're doing for the purpose of education and experience. (Or so I claim - your mileage may vary. Some restrictions and exclusions apply. Offer not valid in all states. Do not drink the bleach)

 

[juanmedina]

Here is another video from the SpotGamma guy:

 

[BrownOuttaSpec]

Do they have 1 day option expirations? I'd setup a IC @ 1070 10/28

/s

Today has been flat as a pancake compared to the rest of the week.

 

[pz1975]

Anyone thinking about what Friday moves may look like if there was going to be another gamma squeeze Monday? If there is a quick move up in the last 20-30 mins I will probably buy some OTM calls for next week to try and take advantage. One of those good risk:reward situations I always look for when buying short-term calls (which I rarely do).

For covered calls for next week, the lowest I am going is 1,500 at this point. Only $1 but better than nothing.

 

[Yoona]

wah, thx for all the DM tips/suggestions on my TA-BMA; nowwww i remember - either this thread or the other thread there were postings about "pledged accts" that give additional leverage, even as much as 2x... i didn't understand it back then.

as for questions, sry i'm replying after trading hours (to avoid hijacking/cluttering):

what are the rules for going forward?
Do you have to periodically rebalance portfolio and give them 1/2 to manage? So it's kept 50/50 or is this a one time thing?
What about future funds. If you acquire capital elsewhere can you put it all in your trading account?
Can you withdraw funds from the bank side for expenses? Say you want to buy a new S plaid can you use the money in the BMA?

This is one-time $ move to BMA, no rebalancing going forward. BMA is locked but i can take periodic payout or let it compound.

Congratulations with all your success!

Does the bank turn promise not to turn around and put the screws on your extra margin if they suddenly decide that they don’t like something or market conditions turn “unfavourable”?

So sick of bankers….

Thanks. This bank division doesn't monitor TA - all they care about is getting their cash and giving me LOC.

Welcome to the Canadian private banking world. I’m surprised they didn’t try to convince you to stack the LoC funds.

Take the 750 put it in BMA and they’ll give you up to another 1250. So actually 2x leverage if you reinvest the capital in a BMA.

All depends on where you are in terms of financial situation and what your risk tolerance levels are. It definitely is an interesting way to diversify. Especially when you also consider that some BMA will provide you structured pay out solutions with capital protection (eg 5-7% annual payouts with guaranteed capital). Compare that to the 1% interest rate and it’s an easy way to lock in cash flows while mitigating downside risk. Then again, so is real estate.

That said, 5-7% doesn’t FEEL impressive anymore… thanks Tesla…

Also anything in the BMA is untouchable from options selling purposes (may be able to sell CCs but not much else).

Another meeting next week. Will ask about that super super super interesting 2x. Thanks for idea. Yes, cannot do options on BMA. I am considering pledging them registered retirement acct instead of TA, if that's even allowed by gov't. Shares there are useless anyway unless i do CC (puts/spreads not allowed).

I think it's a good idea to have some shares in things other than TSLA. Though a catastrophic black swan is unlikely, it is possible, and it would be nice to have a reserve to fall back on. It is true that you'd be reducing your earnings potential by doing this, but the question is, by how long/how much? Many in this thread seems to be projecting gains of at least 2% per week, which comes out to about a year to double your portfolio. If that's realistic, it would set you back a year to put half your portfolio aside as an emergency reserve. I would take that deal. If you want to be more conservative and say it would take 3-5 years to make up the amount set aside, that's more questionable. If it was going to take 10 years, I'd definitely set aside less.

I am forced into this by a 401k for my current employer that I can't get the money out of and can't invest in TSLA or TSLA-heavy funds, etc. I was grumpy about that at first, but it saved a lot of stress and marital friction (my spouse would have been super-unhappy making our entire financial future dependent on TSLA), and I'm coming around to the idea that it was a good thing. Of course, I have a family and kids likely going to college, so there's more futures at risk here than just my own, which changes the arithmetic.

A key question is, if you were going to set something aside, would it be better to just put whatever you set aside into an index fund or something rather than let your bank manage it?

Finally, I wouldn't use increased margin offered by the bank or provided by the set-aside investment. There's no point to this if a black swan can not only wipe out your TSLA assets, but also wipe out the supposedly "safe" ones.

Thanks. Their proposition is if i want the new LOC (worth 75% of BMA), BMA has to be in their funds and they manage it. Good point on not using the LOC, especially on options. But soooooo tempting. This is simply lending me back 750 of the 1000 i signed away, not too bad. And that 1000 grows on its own, albeit slower. I will negotiate such that i myself manage the locked BMA, not them.

Sounds like an interesting option.

The margin rate is appealing; alongside the increase margin %.

If you were keeping 50% in cash anyways, then the loss in immediately deployable capital is not substantial.

Are they using “bankers acceptance” rates for your margin ?

Is this through private baking at one of the major Canadian banks ? Please feel free to post the bank here, or via DM if you are not comfortable posting in the thread. I too have been exploring some banking relationships that provide more flexibility, and have had some interesting learnings along the way.

Margin is "institutional rate" - almost prime. It's TD Private Wealth Management. I really don't think i'm qualified there, maybe they are just grabbing the lowest-hanging fruits now.

In other news... i'm 60+ pages behind on skimming the other thread. Maybe they know why sp is up 39

 

[Yoona]

any opinions on 10/29 1040 short straddle? credit starts at 37 then tapers off; breakeven 1003/1077

2 DTE and theta (+) and vega (-) = good, no? open it Thurs morning then close it Fri morning.

View attachment 726479

TIA!

i got so distracted today, i planned but forgot to open short straddle 1060 at opening; could have gained quick $8-16 on daytrade (margin $55k)

 

[Cherry Wine]

Here is another video from the SpotGamma guy:

Based on today's action, I'd say that video didn't age too well.

 

[InTheShadows]

Does anyone feel safe selling puts over 900 yet? I’m looking at 895’s for next week.

 

[traxila]

Does anyone feel safe selling puts over 900 yet? I’m looking at 895’s for next week.

I sold 1015, 1000 and 940 for next week. But I don't care if assigned, as I am about to have three CCs torn from me.

 

[PastorDave]

Does anyone feel safe selling puts over 900 yet? I’m looking at 895’s for next week.

I've been selling BPS at 1000, 1030, 1050 and even 1070. 1000 seems relatively safe for next week to me, and good premium. It's been a very good week for me.

 

[JustMe]

In my news feed:

Traders Bet Tesla Stock's Rally Isn't Over Just Yet — By Gunjan Banerji

“Traders are swarming the market for Tesla Inc. options to bet on a continued stock rally.

Almost one out of every two dollars spent in the U.S.-listed options market through Wednesday went to Tesla options, according to Cboe Global Markets data. On Monday, traders spent more money on Tesla bets, in what's known as options premium, than they did on every single other option in the market combined. There are more than 5,000 stocks and exchange-traded funds to trade.

By one measure, activity in Tesla options has surpassed trading in its shares. More than $900 billion in Tesla options have changed hands this week, roughly five times the total for its shares, according to Cboe and FactSet data through Wednesday. That is based on the options' notional value, a measure of how much the shares' underlying option contracts are worth, a figure that fluctuates with daily moves in the stock price….

…Call options tied to the shares jumping to $1,100 or $1,200 have been among the most popular trades recently, according to data from Shift Search. On Thursday, calls pegged to the shares advancing to $2,000 were actively traded.”

*Gulp*

 

[MindOverMatcha]

I've been selling BPS at 1000, 1030, 1050 and even 1070. 1000 seems relatively safe for next week to me, and good premium. It's been a very good week for me.

Wow! That's bold but I understand why you feel those are still somewhat "safe"/ doable. I feel like there's still more to climb for next week. What spread width are you using? Are you selling and buying over a few days?