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Wiki Selling TSLA Options - Be the House

I've been trying to make sense of this rally, mainly to make myself feel better about my deeply red ITM lccs. I looked at the last 3 times RSI has gotten to the current levels, and the subsequent pullback amounts.

Below is the drop percentage and what the SP would be with the same percentage given the current $1,200 level.

1. -53% > $564
2. -16% > $1,008
3. -32% > $816

I know the past is not predictive of the future, but I do believe a pullback has to be coming. Mean reversion is a thing. What magnitude is anyone's guess.

11-3-chart.jpg
 
Gary Black on Twitter: "JP Morgan estimates most of the stock and option buying that fueled last week’s $TSLA gamma surge was driven by institutions, suggesting strong HF involvement."

"Net buying since 10/25 totaled $4.5 billion from institutional investors, far more than the $544 million influx from retail buyers."

JP Morgan has me pegged, "Retail investors appear to be more willing to sell puts...due to monetizing the high implied volatility."

Looks like all these institutions went from underweight to balanced. We may not see much of a drop after all. I don't think these portfolio managers are going to pump and dump. Why cause a cascade if they're being "forced" to buy now.

Tesla will soon become investment grade (Q1.2022?), meaning more institutions will be getting the green light to buy. Some of them are not able to buy merely due to Tesla's credit rating at BB+. After another record quarter, they will surely get the rating needed. Among all the possible catalysts (Gigafactory, 4680, etc.), this upgrade to an investment-grade rating may be what will launch it further.
 

BornToFly

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May 8, 2013
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The problem with the way our days are organized at the hospital where I work is that our workload is ultraconcentrated. I can be off for 2 weeks than I have 7 days straight in call with days I have 70 patients at the Clinique while going in the middle of the day do 3 fracture surgeries because some OR room is unexpectedly available. Then you finish the day seeing all the parity of my colleague because they are in another city doing medical expertise and they never comme round their patients. So these weeks it’s virtually impossible for me to manage positions. I tried to show my wife, being an engineer she good with numbers, however our stress thresholds don’t belong in the same world. She has trouble managing 5k to invest from her TFSA, I wanted to show her how to manage BCS and how to move the legs in case the stock is moving unexpectedly against the position but it seems I would have to do so on my stupid iPhone in less than 5 minutes between 2 cases. Which is far from optimal for decision making.
Back when I was operating, trying to trade was a real problem. I remember rushing into trades ten minutes after the market opened because I had to go scrub into a multi-hour surgery. Lost a fair amount of money because of that. I would definitely stick with positions that don't need to be managed very much, and don't rush into trades because you have to go operate.

I may not be the best advice right now for CCs, but I would not buy back your Nov call at this point (for a big loss). It is still OTM, and if it goes ITM, in won't be in so deep, so it will be easy to roll. The problem with the CCs I sold, is that they are two years out, so right now there is no possibility to roll them further out.
 

BornToFly

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May 8, 2013
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I am really torn about my Jan 2024 $1500 strike CCs. I sold them last week for $164, expecting a pull back, and a plan to buy them back at a profit. Instead, they are now at $295 (80% loss). The fact that yesterday's drop isn't continuing today is making me less confident that we are going to have a drop below $1000 and an opportunity for me to buy them back without a loss. So time for another poll.... I expect the SP to be $3000+ in 2024. Taxable account. Do I

1) Let them expire in 2024 and take my $1,500/share and cry about what could have been.
2) Wait until 2024 and then slowly roll up/out.
3) Sell 10% of the shares now to buy them back and eat the loss.
4) Buy them back using most of my cash without selling shares (and then rely more on margin for my BPS).
4) Do something else (like buying Jan 2024 800 strike LEAPS)?

I'm starting to lean toward #4
Well, I was traveling during the dip today. But even in the morning, when the stock was down a little, the CCs went up in value. Now they are up so much, I'm definitely going to wait. I was happy the day I sold them for $3.5M, but now they are worth $7.5M. So I'm going to use the $3.5M to sell BPSs and try to compound the money as much as possible, and buy them back if an opportunity presents itself. If not, I will try to roll in 2024, and keep using the value of the account (Margin) to keep making money on weeklies. Amazing how one emotional decision can haunt you.... 😔 If the SP is 3,000 in Jan 2024, it will only be a $34M mistake....o_O

7C2C5636-9949-441C-8E8B-7F551176B7E9_1_201_a.jpeg
 

JustMe

Active Member
Nov 21, 2016
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Conroe
Well today went about as I expected . . . until noon 🤯 when the hungry hungry hippos 🦛 showed up

The first leg up went from the $1,160 support level to the VWAP, where it was pegged for a while. The on balance volume increased by 500k shares. Buy that feast going into the close was 5x bigger.

Wow 😮
 
Well, I was traveling during the dip today. But even in the morning, when the stock was down a little, the CCs went up in value. Now they are up so much, I'm definitely going to wait. I was happy the day I sold them for $3.5M, but now they are worth $7.5M. So I'm going to use the $3.5M to sell BPSs and try to compound the money as much as possible, and buy them back if an opportunity presents itself. If not, I will try to roll in 2024, and keep using the value of the account (Margin) to keep making money on weeklies. Amazing how one emotional decision can haunt you.... 😔 If the SP is 3,000 in Jan 2024, it will only be a $34M mistake....o_O

View attachment 729056
I did the same, but with only one contract. I can't imagine how you feel!
 

buttershrimp

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Jun 17, 2017
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SpotGamma just posted an interesting video about today’s price action.

Squeeze reinvigorated

Curious if anyone here has any thoughts on this from a devil's advocate point of view. It certainly seems that people were hanging back until Jpowell was done, and that a monstrous amount of delta hedging occurred at the end of the day.... But now that it's hedged fully by most market makers, why does this insinuate it's going up again? After all, it's late in the week. I suppose more folks will buy more calls tomorrow.
 
Curious if anyone here has any thoughts on this from a devil's advocate point of view. It certainly seems that people were hanging back until Jpowell was done, and that a monstrous amount of delta hedging occurred at the end of the day.... But now that it's hedged fully by most market makers, why does this insinuate it's going up again? After all, it's late in the week. I suppose more folks will buy more calls tomorrow.

If I recall his last video correctly, his thesis was that if the stock doesn’t keep going up, then we will have a quick leg down to $1,100 by this Friday as more and more OTM calls go out of money and lose delta. However, because $1,200 was the highest volume call option and now we penetrated $1,200 there will be more volatility tomorrow and Friday. The Market makers will likely have to keep delta hedging as these contracts stay ITM.
 
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buttershrimp

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If I recall his last video correctly, his thesis was that if the stock doesn’t keep going up, then we will have a quick leg down to $1,100 by this Friday as more and more OTM calls go out of money and lose delta. However, because $1,200 was the highest volume call option and now we penetrated $1,200 there will be more volatility tomorrow and Friday. The Market makers will likely have to keep delta hedging as these contracts stay ITM.
But by buying shares, they are effectively delta hedged no? wouldn't more call buyers have to cause them to delta hedge more? If the price goes up, they will have to Gamma Hedge I suppose....

Just trying to understand the concept.
 
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OrthoSurg

TSLA-digger
Jun 2, 2017
1,391
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Montreal
This side of option process is something that not many talk about but is critical point.... the "career patience" aspect of things and learning how much time is needed to manage positions that is really intriguing.

I appreciate your description of your day as I have had to find ways around my schedule and career. 6 months into options trading, I'm just barely barely starting to integrate things less clumsily. For a while, trading options made me bad at 3 things at once.... family, career and options. I'm just now finding strategies that work with my life. The cost of learning options is higher than most people can imagine. It is so far from easy money it's not even funny. reminds me of the story about Mozart and someone saying to him, "I'd do anything to be able to play piano like you" and his answer was... "no you wouldn't"

Some people on the thread are retired, some are working and can't wait to stop working, and others (like me) really enjoy my career but don't want to HAVE to keep working the same amount and saw options trading as a possible way of doing that with a company I follow constantly.... if I do really really well, I'll still do my career, but about 2 hours a day less of it with more massages and martinis and ski trips interspersed throughout.

Since you are an Orthopod... perhaps I can stop by to fix my ACL after a ski trip?
Haha yes exactly my problem, I can’t stop what I do because the thing I love the most doing is THA Hip arthroplastiy, Unicompartimental knee replacement and ACL reconstruction. I would never stop doing that, however all the calls that come with the OR time and since we are a extremely high volume speciality, the workload is crazy. Even if I wanted to cut back half of my clinics, all my colleague would have 10 patients added and they would have overbooked clinics because all these fractures have to be treated, if you don’t want to leave them crippled. I need to find a way to get my wife interested into trading however she has just started back working after maternity leave and she is working to Integrate Tesla superchargers on the grid, what the guy failed to do before her and postponed 5 superchargers for over 3 years. The end of the grid has so much drop in tension that 8 supercharger stalls would render the grid unstable. She has much work to catch up and I need to find time, which is already rare with the newborn kid and the older ones needing help with their homeworks. Don’t worry you can come anytime for your ACL surgery, I won’t stop doing that surgery anytime soon. Just booked a cadaver lab in Naples, Florida to start the new ACL internalbrace technique modifications for ACL repairs instead of reconstructions. The new studies show promising numbers and better proprioception!
 

mongo

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May 3, 2017
13,950
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Michigan
I need to find a way to get my wife interested into trading however she has just started back working after maternity leave and she is working to Integrate Tesla superchargers on the grid, what the guy failed to do before her and postponed 5 superchargers for over 3 years. The end of the grid has so much drop in tension that 8 supercharger stalls would render the grid unstable.
Sounds like a job for Megapack.
 
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adiggs

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Sep 25, 2012
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Portland, OR
Still travelling for work, so looking for some "safer" positions since I can't be watching the stock all day.

What's the "not advice" on the following:
Iron Condor - I believe we have hit a new trading window for lateral movement, that's why I picked this
850/950 1450/1550
Pays about $7 in premium for close on 11/12

optionsprofitcalculator.com puts the odds on this at 95.6%

Built up a nice pile over the past 3 months, not looking to be greedy, just steady returns now.
With ICs I find it helpful to consider the premium being generated from each side. Making something up - if that $7 is $6 on the put side and $1 on the call side, then I'd do that as a put spread as I don't think that $1 worth of premium is enough for the incremental risk. But if it were $4 on the call side, then yeah - maybe so. Something I would evaluate.

Then again call spreads are dead to me :p I do like owning leaps and selling covering calls on them. The income contribution is much smaller, but it's not trivial and can be a good contributor to the steady returns objective.

I did the same some months back, I was selling lcc's against 15x June 22 c700's, they went ITM and I rolled out to June 22 c780's - I pocketed a neat $192k for that with a guaranteed $120k if the SP was >$780, but look at it now, I threw away $500k of profits, maybe more
The opportunity cost was high, but you also realized some money and took on opportunity cost risk. There was no permanent loss of capital risk which depending on where you're at, and I think you're there, adding more to the pile just makes it harder to keep it stacked - it doesn't really alter your quality of life or range of stuff you can and will go do.

Adding on to this, for those with full time jobs, I'm curious how people structure their days (or even week) to incorporate/optimize their trading. I work a corporate job and I'm on the computer all day, so it's very easy for me to check, but I find myself greatly distracted and maybe spend too much time looking at my account/checking price movement. I'm wondering what steps people have taken to make things a bit more hands off. Do people have a rough trading plan at the beginning of the week, knowing that they want to enter into rough X positions (naked puts, spreads, condors, etc)? how are you laddering into your positions to make sure you have a full position by the end of the week (especially with recent days of just green)? I struggle with this as well.
NOT-ADVICE
This struggle is behind me, but what I was doing when it wasn't....

I like to keep the variety of strategies and actual positions I'm taking pretty small. Then again I'm not allergic to concentrated positions, so that might not be a good idea. Nonetheless I tend to sell the same put spread (as a for instance) in all 3 of the accounts I'm actively managing. Then my mental energy is going into managing the one position that needs three entry tickets, and three exit tickets.

I'm currently using two strategies on the sales side - put spreads and covered calls. Previously I was doing put spreads and call spreads. And before that I was doing short puts and short calls. I've tinkered off and on with other trading strategies, mostly to get a bit of experience. None of them have been good enough to either take over 1 of my two well used strategies, or to get added to the 2 that I'm using. I've begun thinking about also doing short puts in my brokerage instead of put spreads - if I do that then that'd get me back to 3 strategies that I'm making use of.

I DO occasionally establish a smallish aggressive position with the rest in my more typical position - so those would be some incremental management effort. But the idea stands - keep the range of positions simple, and repeat them many times so that the type and timing of entry, the timing on closes, all of that becomes repetitive and something you get better and better at (and thus take less and less time to do, both actual time as well as the mental energy to track and do it).

That's the week scale stuff. The other thing I do is I will frequently spend a small amount of time in the evening considering where we're at, what might happen tomorrow, and whether I want to be looking for a trading opportunity tomorrow and if so - what will that trade be? As an example for me right now - I've got some 1200 strike calls expiring this Friday. It looks like I could roll those to next week 1250s and pick up a $7-8 credit. I like that roll so I'm probably going to be looking to do that first thing. I might even enter that order tonight before I go to bed, so I get that roll first thing if its available. Meanwhile my put spreads are so new that I'm not planning to do anything. But wait - maybe the are SO far OTM that I could roll a bit closer, keep the same expiration, and pick up some worthwhile incremental premium (and incremental risk). I'll put a little time into gaming out that idea to see if its worthwhile (I might do it for an incremental $1.50, but not .50).

So I use my evening hours to game out some scenarios in my mind, so I can act tomorrow with less time and energy then.

I rarely ladder into positions. It's a great thing to do and I understand why its done. It just takes more effort and part of what I optimize for is less effort. My view on it - if the current position being offered is one that I like, then just open the whole position that I want and be done with it. It might get better, it might not - but I don't want the mental energy going into looking for that improvement. Worth noting - to identify "good" or "position I like", I need some idea of what enough or my target is. If I don't know what my target is, then 'more' is the target, and that can't be achieved :)

It’s amazing how one can get out of trouble by rolling a week, or alternatively receive a lot of extra premium. If today just before close you rolled a short call 1250 from 11/5 to 11/12 you would have gotten $27. And if you rolled with no extra premium you could have gone all the way up to 1370. Both the 11/5 1250 and 11/12 1370 are about $12.5.

I remember doing this with monthly puts, but it was much more difficult. I guess the weekly options are much more suitable for this kind of manoeuvring.
I tend to agree with your observation and agree that the weeklies are more suitable for this. Conceptually I think its easy to see why - when we roll, we start by buying out the time value on the current position, so we can sell the time value on the new position. The difference in time value between a 3 day and an 8 day option is really big (%; maybe also $), while the difference in time value between a 1 month and a 2 month option is not. It's both a % thing, as well as how close to expiration the position being closed is (everything else being equal, closing the losing leg as it nears expiration is better than earlier, but everything else isn't equal - my bias is to earlier rolls now; the bigger buyout on the losing position is associated with an even better sale on the new position).

So rolling a 1 week to expiration option out to 4 weeks might be a good choice for further ITM positions.


Something I got into the habit of doing when IV was much lower is to also evaluate the 2,3,4 week rolls, in addition to the 1 week rolls. If the 2/3/4 week rolls are more or less straight multiples of the 1 week roll, then I probably do the 1 week roll, so I get a sooner opportunity to win (shares reverse and I go OTM). I also get more frequent opportunities to adjust.

But I've also been in situations where the 1 week roll was for $1 or less and no strike improvement at 1 week, while the 2 week roll was much better than 2x the 1 week roll. Like a $1 credit and 1 strike improvement for 2 week roll - take the 2 week roll. And the 4 week roll might be much, much better than 4 of the 1 week rolls. NOT doing this evaluation is part of why my hell puts at the start of the year (roughly Feb through June) lived as long as they did. If I'd been doing monthly rolls when I went deeply ITM, then I'm pretty sure I'd have continued moving the strike closer and it all would have been resolved that much sooner and that much better.
 

adiggs

Well-Known Member
Supporting Member
Sep 25, 2012
5,247
17,457
Portland, OR
Haha yes exactly my problem, I can’t stop what I do because the thing I love the most doing is THA Hip arthroplastiy, Unicompartimental knee replacement and ACL reconstruction. I would never stop doing that, however all the calls that come with the OR time and since we are a extremely high volume speciality, the workload is crazy. Even if I wanted to cut back half of my clinics, all my colleague would have 10 patients added and they would have overbooked clinics because all these fractures have to be treated, if you don’t want to leave them crippled. I need to find a way to get my wife interested into trading however she has just started back working after maternity leave and she is working to Integrate Tesla superchargers on the grid, what the guy failed to do before her and postponed 5 superchargers for over 3 years. The end of the grid has so much drop in tension that 8 supercharger stalls would render the grid unstable. She has much work to catch up and I need to find time, which is already rare with the newborn kid and the older ones needing help with their homeworks. Don’t worry you can come anytime for your ACL surgery, I won’t stop doing that surgery anytime soon. Just booked a cadaver lab in Naples, Florida to start the new ACL internalbrace technique modifications for ACL repairs instead of reconstructions. The new studies show promising numbers and better proprioception!
Maybe instead of your wife, you need to indoctrinate the kids :D Something for the whole family!

They might be hard to live with if they are out-earning you when they get to high school, but if there is a #firstworldproblem, that's got to be it.
 
But by buying shares, they are effectively delta hedged no? wouldn't more call buyers have to cause them to delta hedge more? If the price goes up, they will have to Gamma Hedge I suppose....

Just trying to understand the concept.

It’s a constantly moving target. Without knowing a market maker’s books, we won’t know if they are properly delta hedged yet. We don’t even know their tolerance for risk either. For example, maybe they are ok with being 95% hedged instead of 100%.

An ATM call for Nov 5th ($1,215) sold for $25.10 at the close. If we just have a flat day tomorrow this option will probably lose 50-75% value and the MM can sell a lot of the shares they bought today to delta hedge. Stock price then goes down, which kills the value of more calls, which allows them to sell more shares, and the stock price goes down more. If we didn’t have that late day surge then it’s almost certain the stock price will go down for the rest of the week because of the idea above, but since we broke through $1,200, all bets are off again and we will see some volatility (up or down). It should be fun.
 

dc_h

Active Member
Feb 14, 2015
3,581
13,681
Naperville, IL
I am really torn about my Jan 2024 $1500 strike CCs. I sold them last week for $164, expecting a pull back, and a plan to buy them back at a profit. Instead, they are now at $295 (80% loss). The fact that yesterday's drop isn't continuing today is making me less confident that we are going to have a drop below $1000 and an opportunity for me to buy them back without a loss. So time for another poll.... I expect the SP to be $3000+ in 2024. Taxable account. Do I

1) Let them expire in 2024 and take my $1,500/share and cry about what could have been.
2) Wait until 2024 and then slowly roll up/out.
3) Sell 10% of the shares now to buy them back and eat the loss.
4) Buy them back using most of my cash without selling shares (and then rely more on margin for my BPS).
4) Do something else (like buying Jan 2024 800 strike LEAPS)?

I'm starting to lean toward #4
Depending on how many you sold, you can roll them as new dates appear. I had 5 long dated calls at 5000 (presplit) and the odds of the stock going that high seemed unlikely and if it went to the now $1000 post split, I'd be pretty happy. I am happy, but I'd like to be happier. If you have 5 or more, you can wait for a new date and buy 5 back and sell 4 at the new date. You can't cut them down to zero, but you can reduce the position a bit, or roll for a higher strike. It's tough, you sell at a price that seems like you should be happy with, but market sentiment shifts and it feels like you reduced your opportunity.
I'd focus on the very positive result, use the cash to sell BPS and use some of that income to buy back the calls or just have some fun. That's me and I'm not a professional investor and I'm terrible at taking or giving advice.
 

OrthoSurg

TSLA-digger
Jun 2, 2017
1,391
10,374
Montreal
Sounds like a job for Megapack.
Exactly what I told her.
but it seem Hydro Quebec engineered have already been working on their own proprietary battery design with juge containers of inefficient batteries they are trying to integrate in the grid. But they are having problems holding charge and voltage during winter tests. Thy have so much sunk costs they are trying to save the face.
 
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