Wiki Selling TSLA Options - Be the House

[CLK350]

If there's a large dip immediately on Monday, or in the next few days, or next week, I'm struggling to figure out how to take advantage of this in my IRA where I'm zero cash and 100% TSLA and I just started making weekly far OTM CC.

I'm thinking of converting <10% of shares to LEAPS but do I

A. Sell shares outright at the dip prices
B. Write aggressive CC for big premium and hoping to get assigned

I know B is essentially me asking how do I time volatility.

Any suggestions on which Jan 24 strikes?

Tough one indeed - the ideal situation if the SP would languish for long enough for the IV to go down (as it did back in Summer) - my inkling now is to just sit on my hands. Thankfully I cashed out and converted to shares all my ST calls, the only remaining ones are Jan onwards.

Still ... any bright ideas re medium term bullish calls - if I am quite sure the SP will be in the 1300-1850 range by Jan 1 22 ?

PS. Am also conjecturing Elon's not finished playing that current game. He's figured out how to deal w/ either outcome, and the next steps too. Another reason best to sit on my hands.

 

[bkp_duke]

Out of curiosity..what per cent of your portfolio is put into play weekly?

In the trading account, 75-90%. I started with a 60k "test case" in this account and dedicated it to what was learned in this thread and is on-going here.

Retirement accounts are 50% TSLA, and I'm content to leave that portion untouched, 25% other stocks, and 25% cash. In those accounts, I do BPC/BCS/IC on the free cash only (there is no margin allowance in retirement accounts).

 

[bkp_duke]

How do you get 5-7% return per week while being conservative? In my opinion, conservative means trading 20+% OTM, and maybe getting $1.5 premium on $200 spreads. That gives you a 1% return/week.

I guess it really all comes down to one's definition of "conservative". 20% OTM is more conservative than I consider conservative. But we each have our own definitions, goals, life circumstances, etc.

I model my trades in optionsprofitcalculator.com, only do weeklies no more than 10 days from expiration, and usually avoid BCS unless I'm very confident that things are going to trade laterally for a good while. This usually leaves me in a position of trading just BPS, and I only enter those positions if the above calculation is 95% odds or better (occasionally I've dipped down to 93% - and those are the times I've really had some indigestion watching the share price).

The put premium increase we saw about a month ago was an absolute goldmine for the above scenario, and I was getting nearly 10% per week for a while with those trades. The recent IV crush has pushed those returns down, but I'm fine with that. Slow and stead wins the race (I hope).

Basically, I have rules that are modeled after @Yoona 's, and so far they have served me well (until they don't, right?). They kept me out of trouble in the recent run-up, and it helped me have my best month yet.
Basically my rules are:
1) don't be greedy
2) see rule #1
3) don't risk more than I am absolutely willing to see go away completely, at the drop of a hat
4) follow this thread and make sure my trades are not so far out of line with those here that have a lot more experience than I do. I really do value the experience from those here that have been doing this a lot LOT longer than I have (@Lycanthrope @adiggs @BornToFly @Chenkers @Yoona and others here that share their wisdom).


In the past month, along with Rules #1 and #2, I have been backing away from the SP with my BPS, as the investment returns have accumulated. I'm now perfectly comfortable with a profit of 20-25k/wk, even if the risk calculator says I could be more aggressive and make more. For me, 20-25k/wk is money that I could have only dreamt of a year ago, and really accelerates some life goals like:
a) fully saving up for 2 kids college (and grad school if they want) at private tuition prices
b) fully paying off a mortgage before the above 2 kids go to college
c) retiring by 50 with just using trading money from that point on for income
d) upgrades to the house, buying nicer Teslas, etc.

Apologies if this was too long-winded in my explanation.

 

[Yoona]

Thanks- that was very informative.... one clarification- $2 as target premiums is on $50 spreads I'm assuming? (since that's what the last trade I can find you posting was) meaning 4% ROIC? (and available C being 2x what you'd have if you were just using margin on shares)



One other thought on the math-- and this is maybe just a US thing...

But gains from weekly options are gonna be taxed (assuming a taxable account) at roughly 40-50% depending on your state, and due annually- assuming pretty reasonable income to be doing this at all.

Whereas share gains aren't taxed until sold.... and even then only at 15-20% if held at least a year.... I'd think that would have at least some impact on the compounding math.

Not necessarily enough to change cash beating shares, but given it's compounding growth having to take 40-50% of the gains off the table for taxes has to make a noticeable difference? (in the US anyway you'd likely need to be paying taxes quarterly given the amounts we're discussing so I guess you get SOME full compounding in between quarterly payments but nowhere near the full yearly impact)

Still... in something like an IRA where there's no taxes to worry about for growth this is pretty compelling math for going all cash at this point.

to make the "slow and steady automated income" scheme successful, the first goal is to be far OTM (i'm at 18%); then, get the found credit as is

but you are right: if one has no stock and has $100k cash capital and uses only 80% (ie $80k as "cash-secured margin" and $20k as reserve) and opens $50 spreads at 15% OTM and BTC at 80% and aims for $2-3 credit, it's 3.84% gain on Week 1 (as per last night's chain).

if the acct only has defined risks (ie, I only have Credit Spreads) then the $20k reserve is mostly there for peace of mind; one can use it coz there is no fluctuating margin

 

[JustMe]

Brad Ferguson: "
I shall define massively as down -6.942% or more or finish of $1,137.25 or lower.
6:25 PM · Nov 6, 2021 "

An indication of why "1137.25 or lower" - but then why 1137.25 in that market ? Let's hear it from our best and brightest

View attachment 730282

He made up the number from the meme-derived sp drop of -6.9420 %. It’s not worth further thought.

 

[Tslynk67]

So, a few of us fretting on open BPS, right...

I looked at the numbers for the 800/900's I have open and I can rebuy the short leg without loss down to around $1050, although that depends a bit on how IV reacts

My preference is to close those shorts out, then see where things go, if we get more of a drop then maybe selling the longs become a good recovery, if goes back up, maybe resell the short side, but at a lower strike to recover a bit, or maybe roll down and out a couple of weeks

I guess we'll need to see how things go in pre-market... but still not much reaction that I can see other than the shock from retail shareholders, no-one see seems to care

I also would say that the MM's/Hedgies will be caught off-guard as much as us, takes them some time to reposition

 

[AquaY]

How do you get 5-7% return per week while being conservative? In my opinion, conservative means trading 20+% OTM, and maybe getting $1.5 premium on $200 spreads. That gives you a 1% return/week.

You can trade BPS with a 100 point spread and an IV probability of 95 % or greater for success and get 3% return. That's anywhere from 10-15% OTM
That qualifies ( FOR ME) as Conservative.
I guess it all depends on your personal definition of Conservative

 

[MXWing]

Given how even a 5% move matters for us here, curious where people think this will actually end up landing at the close tomorrow:

I've elected -5% down and hoping it's not worse than that.

Given the passage of YES to Elon's Twitter Poll - Where do we end up at the close on Monday?

I'm going to guess -5% down. My rationale is some will sell. However, some have to realize Elon isn't going to login to his Robinhood account and sell 10% the same way us retail would.

teslamotorsclub.com

 

[EVforLiPo]

Elon knows very well that he has to do something or TSLA will go straight to two trillion dollar plus market cap. That to me is a bubble.
First was Hertz did not sign a deal now he is selling 10% of his shares.
This is a classic bear trap and we should see more slow and steady upside. Only way for TSLA to tread down is earnings miss or market sell off. Both of which at the moment has very low probability.

 

[bkp_duke]

Given how even a 5% move matters for us here, curious where people think this will actually end up landing at the close tomorrow:

I've elected -5% down and hoping it's not worse than that.

Given the passage of YES to Elon's Twitter Poll - Where do we end up at the close on Monday?

I'm going to guess -5% down. My rationale is some will sell. However, some have to realize Elon isn't going to login to his Robinhood account and sell 10% the same way us retail would.

teslamotorsclub.com

I'm betting it's a nothing burger, but I'll be watching pre-market and early open. Still, positioned far enough out at 950/1000 for my BPS that I can adjust if necessary.

Guess we will know by this time tomorrow.

 

[euro2012]

Perhaps its wishful thinking (although my highest 11/12 BPS is currently 920/820), but it seems to me that there is quite a bit of excitement about a ‘buy the dip’ event. Would that not mean that any selling would be immediately bought up, negating much of a drop? Indeed, time will tell. I’m less worried about the 11/12 BCS 1600/1700 that I sold last Thursday at $1.2 now, lol.

 

[Ogre]

Hopefully, like tweeting that any selling isn't happening tomorrow. Someone posted (on the other thread I think), that he has to file paperwork and sell months from now (don't know if that true).

If his announcement materially affect the stock price (likely yes), then he should probably isolate any trades from the announcement.

I doubt musk is over-worried about insider trading rules though. The bigger thing in my head is I can’t see Musk giving a gift like this to the shorts. If he does liquidate part of his investment, I suspect he is going to do it in a way that won’t involve a massive drop in share price.

 

[UnknownSoldier]

I have -880/+820 BPS out for 11/12 and I'm not sure exactly if I should be worried about these on Monday. That's only like a 28% drop from where we are now. You might laugh about the likelihood of a 28% drop but I didn't get to where I am as a TSLA investor by not being paranoid. Only the paranoid survive owning TSLA.

 

[Oil4AsphaultOnly]

damn! Now I regret closing my BCS 1400/1600 on friday at a slight loss!

 

[corduroy]

I have -880/+820 BPS out for 11/12 and I'm not sure exactly if I should be worried about these on Monday. That's only like a 28% drop from where we are now. You might laugh about the likelihood of a 28% drop but I didn't get to where I am as a TSLA investor by not being paranoid. Only the paranoid survive owning TSLA.

If I'm not mistaken the largest single day drop in TSLA history was 21% after the S&P snub. Anything can happen, but I don't think Elon's tweet will cause anywhere near a historic drop in TSLA. I have -895/795 BPSs and am not worried about them. I'd be shocked if we go below $1,000 next week. (famous last words)

 

[EVCollies]

If we see a big drop tomorrow I will transfer some TSLA from IRA->Roth IRA to minimize the tax man.

I might even try my first long call, considering a 12/3/21 (furthest out Schwab allows me at the moment) at .3 delta, at end of trade Friday was 1335 @ 40.5 debit but would be better if we had a drop.

Once again I thank everyone here and agree with the great weekend chatter, don't be greedy and be happy with week over week 1-3%. I've set a GTC on most my investments for that 1% and many weeks have been able to trade twice, with another 0.5-1%.

 

[bballshinobi]

Obviously the TSLA tokenized stock is not the same thing as TSLA and the volume isn't high enough (only $150K traded in the last 24 hours), but we can see the knee-jerk real time reaction from Elon's tweet:

It should be a very interesting Monday.

For those of us who have deep in the money CCs, what are you planning to do? Use this opportunity to close out your CCs? Or are you going to wait it out and see if TSLA falls further? My $1,100 CC's would really appreciate a $1,100 close this Friday lol.

 

[MindOverMatcha]

11/5: Wow! If I can get a 3% return from my BPSs, I'll be so happy!
11/7: Wow! If I can get a 0% return from my BPSs, I'll be so happy!

My gut feeling is that Monday will be a red day, but the rest of the week maybe green. People will sell the puts they bought, then buy some calls while TSLA is in the red. Depending on the volume it'll create enough momentum for a reversal from down, neutral, to up. Gary Black and Dan Ives (Wedbush) seem to be spinning this as a nothing burger while highlighting the benefit of airing this news out publicly and ahead of when Elon would actually sell.

Mandatory Morning Dip Monday. Thinking of rolling my BPS to next week further OTM. My hope is that after Monday we hit green days moving forward, allowing me to close out my BPS. However, if we continue to cascade down, I'd roll my BPS out to 11/26. I've never rolled further out than 1 week out but I'd do it just to buy myself time enough for a reversal.

Hard for me to predict if BTC at market open is the best, to just nip the bud early before a cascade down. Sell shares at market open as well.

This is just my brain planning for a bad scenario where we dip down throughout the day and getting out early beats getting out late.
I imagine the shorts, MMs, and Hedgies smell the fear and will capitalize on it. Fundamentally nothing has changed as it is all short-term action.
One caveat is that Macro and tech indices may be strong on Monday open which can help Tesla carry itself up.

Of course, I know nothing and have no better view of the future than anyone here. I suppose I'm "venting" but also just sharing the different strategies I'm ready to pull once morning comes.

Now I'm FEELING the wise words of those veteran options players. Far OTM, don't be greedy, don't chase premiums, etc. A lot to be grateful for in being humbled early on and to come out to play another day.

 

[BornToFly]

If we see a big drop tomorrow I will transfer some TSLA from IRA->Roth IRA to minimize the tax man.

I might even try my first long call, considering a 12/3/21 (furthest out Schwab allows me at the moment) at .3 delta, at end of trade Friday was 1335 @ 40.5 debit but would be better if we had a drop.

Once again I thank everyone here and agree with the great weekend chatter, don't be greedy and be happy with week over week 1-3%. I've set a GTC on most my investments for that 1% and many weeks have been able to trade twice, with another 0.5-1%.

Last week was my first week using 200 spreads instead of $50. It looks like I can sell 8 days out for a decent premium even with a 25% safety margin, then narrow the IC a little Monday-Wednesday for almost as much total premium as if I had started tighter. But the wider spread gives more room for weekend surprises, like the Hertz deal before Monday open, and now the Elon tweets about selling stock....

 

[juanmedina]

I think I am going to close my BPS early no matter what. Just incase we keep trading lower into Tuesday and that's when I will reopen some positions. Mine are fairly safe with $900 naked puts and BPS at 890/790 and 875/775. My 11/12 1100cc are going to love the SP drop; I wonder if I should roll them way up for the following week or close them at a lost of around 20k I assume .