Wiki Selling TSLA Options - Be the House

[LightngMcQueen]

I am now either a degenerate or a smart trader (or both?).

I said I was gonna keep my 1m IRA (all from sold early 2021 TSLA gains) away from invidividual stocks, but just threw everything into a variety of longer dated put spreads, Jan 23 - Jan 24 mostly around 450/650 and 500/700. Up to a 40% return on what I think are "conservative" breakeven points.

Could you share your thinking about selling longer dated vs shorter dated PUTs ?

I was firmly into rolling shorter dated OTM PUT spreads, but learning about Emmet's and Matt strategy of selling ITM LEAP PUTs made me question that. Here is what gut feeling/ basic option math tells me now:

A. rolling weekly/monthly PUTs does appear to produce larger premiums than longer dated options for the same strike price however this higher premium accurately prices higher risk so no real arbitrage here,

B. money is made from difference between implied and realized volatility and this difference is the highest for OTM PUTs (as there is strong demand for protective OTM PUTs driving their premiums way above what probability would dictate), this would be argument for dropping short leg of spread and possibly lowering strike of long leg. Of course some leverage is lost.

A + B => OTM LEAPs PUTs offer highest risk adjusted return

I am still trying to poke holes in my approach so criticism is very welcome.

 

[ZeApelido]

Could you share your thinking about selling longer dated vs shorter dated PUTs ?

I was firmly into rolling shorter dated OTM PUT spreads, but learning about Emmet's and Matt strategy of selling ITM LEAP PUTs made me question that. Here is what gut feeling/ basic option math tells me now:

A. rolling weekly/monthly PUTs does appear to produce larger premiums than longer dated options for the same strike price however this higher premium accurately prices higher risk so no real arbitrage here,

B. money is made from difference between implied and realized volatility and this difference is the highest for OTM PUTs (as there is a strong demand for protective OTM PUTs driving their premiums way above what probability would dictate), this would be argument for dropping short leg of spread and possibly lowering strike of long leg. Of course some leverage is lost.

A + B => OTM LEAPs PUTs offer highest risk adjusted return

I am still trying to poke holes in my approach so criticism is very welcome.

If the stock price appreciates signifcantly from here, it would be hard for me to continue to set the same OTM % away from current share price every week to gain the consistent returns to outperform the longer dated spread. If TSLA jumped to $1500 in a week, would I really be comfortable selling 1000/1200 spreads? Not sure. I am able to "lock in" the spread price even if TSLA goes up.

So think it's definitely better mentally that dealing with short term options. Still worried if share price goes down either way, but better if it stays flat or goes up.

No doubt great prediction and using shorter term options could in theory produce better return, but for most people probably not that much better.

 

[LightngMcQueen]

If the stock price appreciates signifcantly from here, it would be hard for me to continue to set the same OTM % away from current share price every week to gain the consistent returns to outperform the longer dated spread. If TSLA jumped to $1500 in a week, would I really be comfortable selling 1000/1200 spreads? Not sure. I am able to "lock in" the spread price even if TSLA goes up.

Thanks that definitely makes sense from work load point of view.

One way to lock in potential for price appreciation is to sell ITM LEAP PUTs. I believe thats what Emmet&Matt have done by selling $1000 LEAP PUTs earlier this year when SP was still in the 600s.

I did something similar today selling some Jan 23 RKLB $20 PUTs ( much higher IV than TSLA) as small proof of concept for this approach - will see how it evolves.

 

[BornToFly]

Here is my problem with LEAP spreads. You sell a Jan 2024 800/1000 spread. Then we have a black swan event that drops the SP to 700. There is a lot of time until expiration and the SP will probably recover, but if the SP never comes back up, you are looking at the full loss of $20,000/contract. I like weeklies because if the SP is dropping, I can roll with it and never be looking at a max loss in the face, which would keep me up at night.

 

[BornToFly]

Here is my problem with LEAP spreads. You sell a Jan 2024 800/1000 spread. Then we have a black swan event that drops the SP to 700. There is a lot of time until expiration and the SP will probably recover, but if the SP never comes back up, you are looking at the full loss of $20,000/contract. I like weeklies because if the SP is dropping, I can roll with it and never be looking at a max loss in the face, which would keep me up at night.

Also, the return is terrible compared to weeklies. A 700/1000 for Jan 2024 returns about $1.6/week. You can do better than that with a really safe 600/800 for Dec. 17

 

[intelligator]

Per @generalenthu call / put volume table, a heavy volume of put came in a minute before market close. Seeing overall today that the volume was mostly 900/950 puts near close and 1000/1050 calls scattered through the day, I thought it'd be good to take a look at both call and put volume for the 10th.

Wow! What is implied when there's two or more walls for a put or call?

 

[Tslynk67]

Per @generalenthu call / put volume table, a heavy volume of put came in a minute before market close. Seeing overall today that the volume was mostly 900/950 puts near close and 1000/1050 calls scattered through the day, I thought it'd be good to take a look at both call and put volume for the 10th.

Wow! What is implied when there's two or more walls for a put or call?

View attachment 741483

In my experience, the manipulators prefer not to payout calls over puts, in fact I'm not even sure they pay any attention to puts, most of the time, probably happy to gobble up some cheap shares to cover their naked shorts

 

[doddiozil]

Sold $1120 - $1170 BCS to create a IC from my $950 $900 BPS expiring this friday

 

[FS_FRA]

Closed my 12/10 BPS 900/700 for 85% profit as per the GTC order I had running since I opened it.

Going to wait a few days I think before opening the next position - maybe after 12/9, although that seems to be a nothingburger.

 

[TheTalkingMule]

Wonderful morning, closing out all my 12/10 BPS @ 75-90% profit.

STO 12/10 $1115 CC @ $6.65. As we wait on FOMO and nerves are still raw from the mega dip, I'm hoping to sell a limited number of CC contracts every week for $5-$30 depending on SP. I'm ok selling a few shares at $1200-1250.

I would think we're set up for a clear $1050 or $1100 close this week. Here's hoping we get a big dip tomorrow on some random "news" story so next week's BPS can be sold.

 

[tradenewbie]

Close out all my BPS for 85-90% profit, likely can close with better price, but would prefer closing it without any potential drama this week. Will open BPS for next week if there is a serious drop this week

Likely 1050 today would be a resistance zone for sometimes today, but will just let it run or drop from there and not open any cover call for this week (although it's safe to close it before 12/9 anyway)

 

[BrownOuttaSpec]

Closed my 12/10 BPS 900/700 for 85% profit as per the GTC order I had running since I opened it.

Going to wait a few days I think before opening the next position - maybe after 12/9, although that seems to be a nothingburger.

Same for me! Closed out my 12/10 800/900 for about 85%, waiting for a dip (more Elon selling?) to get in for next week.

 

[BornToFly]

Same for me! Closed out my 12/10 800/900 for about 85%, waiting for a dip (more Elon selling?) to get in for next week.

What if the dip doesn't come? Theta is burning. I always close and open at the same time to increase my time in the market vs timing the market. Sure, I kick myself sometimes when there is a dip and I see that I could have sold my BPS for more, but I don't want to kick myself with no positions (and no money in my pocket) if there is no dip and premiums just keep dropping. Has anyone tried both technique side by side to compare outcomes?

 

[tradenewbie]

Like others I used this nice pop to rebut the 35x p1000 I sold yesterday, average price of $32 for $8 - 7 did't trigger ($8 is the low for the day so far), but 75% profits and $85k overnight is good enough for me!

Will try to be patient and wait for a dip to open something new, after two big macro up-days, surely that chance will come

Edit: patience never was my strong suit, back in with 35x 12/17 -p1000 @$30

Amazing
Your original 35 X p1000 you sold yesterday for $32, was the expiry for 12/10 or 12/17?

 

[MikeC]

What if the dip doesn't come? Theta is burning. I always close and open at the same time to increase my time in the market vs timing the market. Sure, I kick myself sometimes when there is a dip and I see that I could have sold my BPS for more, but I don't want to kick myself with no positions (and no money in my pocket) if there is no dip and premiums just keep dropping. Has anyone tried both technique side by side to compare outcomes?

It just depends what the stock does. If it moves against you, better to wait. If it stays flat or moves away, better to open at same time. It's not really something you can test to make future predictions because the market will be different each time.

 

[tradenewbie]

What if the dip doesn't come? Theta is burning. I always close and open at the same time to increase my time in the market vs timing the market. Sure, I kick myself sometimes when there is a dip and I see that I could have sold my BPS for more, but I don't want to kick myself with no positions (and no money in my pocket) if there is no dip and premiums just keep dropping. Has anyone tried both technique side by side to compare outcomes?

I always have this question in mind as well, and wonder if anyone has compared the result.

In the past I only close BPS with <0.1 then wait for a dip to open BPS, later on I started closing BPS when achieving 80-90% profit zone and then wait for a dip to open BPS.

 

[adiggs]

Catching up from yesterday - I had 750/1050 put spreads for this week with a decision that if we touched 975 then I would roll. I'd made that decision in advance as being my limit to how far ITM I would go before an aggressive roll for strike improvement. I didn't want to go out that extra week, but we end up doing things we don't wanna, eh?


I decided to roll these 3 different ways, nothing particularly exotic. In the aggressive retirement account I went straight out 1 week to 750/150s. That got a nice credit though I forget exactly what it was. In retrospect this position I should have just sat with - once I'd decided to go straight out then there wasn't a need to roll for additional time - I'd be able to roll straight out for no credit all the way down to $900 share price.

In another account I went for a regular roll for max strike improvement. With shares around $970 the 750/1050s for this week turned into 735/1035 - a $15 strike improvement while $80 ITM.

In the third account I decided to take my first spread width compression and roll into 50% more $200 wide spreads and max strike improvement. That got me to 800/1000s. An interesting observation here - the midpoint of the new spread is the same as it was before, while the straight roll for strike improvement moved the midpoint down $15 along with the strikes. I'm assuming this will generalize - my learning here is to take the regular roll while its still a good one as that will actually move the midpoint. This spread width compression, at least in this instance, did not move the midpoint.


I've got some tracking updates to figure out how much credit I'm pushing along with these positions.

 

[adiggs]

What if the dip doesn't come? Theta is burning. I always close and open at the same time to increase my time in the market vs timing the market. Sure, I kick myself sometimes when there is a dip and I see that I could have sold my BPS for more, but I don't want to kick myself with no positions (and no money in my pocket) if there is no dip and premiums just keep dropping. Has anyone tried both technique side by side to compare outcomes?

NOT-ADVICE
This was my intent and approach back at the start of the year - rolling one winning position into a new opening position, with the intention of being in the market as close to full time with Theta chipping away for me, as I possibly could. I also wanted to be in the market on both sides (puts and calls) - I thought of that as my perma-strangle though the puts and calls weren't always on the same expiration date, so technically not a strangle. Sometimes an inverted strangle.

That was part of how I got into trouble with naked puts in Feb-May, though that was mostly not having as many management tools to work with.


Over the summer I started looking for at least some strength (or a belief that the current share price was a local min/max) before selling the positions. Still looking to be in the market with both puts and calls. What happened for me is that my income skyrocketed when I started doing this. Like 3 of my best 3 months over the summer when I started opening into strength (down for puts, up for calls) and closing on weakness (up for puts, down for calls).

I don't always get the local min for puts even vaguely correct. Like the 750/1050 put spreads I opened when the shares were off $5 at $1150 last week - that was still a better entry than earlier that day when the shares were actually up.


If I were opening calls today today would be a day to consider that with the shares up $30. Heck I might do that anyway - need to think about it. I've improved my results pretty significantly by being willing to be out of the market for days or even weeks at a time (though its mostly been hours or a day or 2 ).

 

[FS_FRA]

Same for me! Closed out my 12/10 800/900 for about 85%, waiting for a dip (more Elon selling?) to get in for next week.

Crazy thing is, the BPS was @ close to $20 yesterday during the dip, and I closed it at $0.84

 

[tradenewbie]

Crazy thing is, the BPS was @ close to $20 yesterday during the dip, and I closed it at $0.84

Did you open more BPS yesterday during the dip as well? I closed some -850/+650 BPS immediately during open (since SP already broke below 1000 during pre-market and I think it would continue to drop), and opened the same BPS again during the dip (not dare to open for 12/17 because its still have 2 whole weeks for expiry)