I was expecting a V-shaped recovery at end of day like the previous two days. Maybe tomorrow? I really hope Elon sold today....
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
I think we still have time but looking unlikely. What are people's thoughts for next week? You would think smart money will at some point start buying up Tesla but maybe the Elon selling is holding them back.
Quick update. I am a newbie and started a month ago and am now sitting on an 1150$ short put because I was too greedy with the premium and then the stock crashed. For the last few weeks I have been rolling the same deep ITM strike price so I am still getting premium every week. But I'm a little nervous that I might get assigned, even though the likelihood is low.
I only have a 30% margin cushion left. Probably not enough to cover.
Actually, I'm not sure what the best strategy is to get out of this. I would need to buy it back for 19k$.... my premiums received over the last weeks about 9k$.
Here's what I'm thinking about: a) I keep rolling to the same strike price out to collect at least a small premium (but could change if the IV gets lower)
b) I close in the next stock rise for a deep loss, learned my lesson and start again with a slightly safer play.
c) ... Someone a better idea?
Best Regards,
I don't think this helps when the margin call is 10% of the entire portfolio, but would be happy to learn more.
corduroy
Active Member
Everyone has different risk tolerances, but in that situation I would be looking to roll for maximum strike improvement, not premium.
There are a gazillion options for management that don't involve just rolling.
for example - custom ticket -
BTC the $1150 P for $20k
STO 12/23 $900/$800 BPS x 10 for $20k premium received and less margin requirement and you are done next week as long as SP is over $900
Or roll that if it is threatened to the following week (12/31) down $10 for some incremental credit as well.
Flehmenlips
Member
I think it might surprise you how helpful it is. Get your broker on the phone and discuss it with them. It changes the way they calculate your margin requirements (potentially. I don't know your situation). You may need to apply for higher options trading approval, which is generally pretty easy to get in my experience. In ThinkorSwim on TDAmeritrade you can go to the analyze trades tab and add simulated trades and then see how it affects your margin requirements. Puts turn out to be super helpful when the market is down hard. I'm just learning this very realtime in the past 10 days or so.
Well fukk....fat fingered a roll 3 min from closing - wanted to roll my 12/17 -900/700 to 12/23 -850/650 (for a nice $4 credit), instead rolled to 850/-650 (creating a bear put spread)..... manage to close it out immediately at the cost of last weeks premiums 
I didn't like the way we were going after breaching the "safe" 930s, that stood up all week plus the fact that tomorrow will be volatile (witching etc.) and Elon might sell again to finish up. And can't watch the trades tomorrow as I'm volunteering. So wanted to move everything down and out to next week and then deal with it.
Instead I wiped out my premiums for the last week and learned a valuable lesson (or two): 1. always check your trade twice before hitting the go button. 2. don't try to roll under pressure to beat the clock.
Live to fight another day! If I have time tomorrow I will look to re-open BPS well OTM for 12/23 and start making my money back. At least - in theory - a loss here or there is good for taxes...
I didn't like the way we were going after breaching the "safe" 930s, that stood up all week plus the fact that tomorrow will be volatile (witching etc.) and Elon might sell again to finish up. And can't watch the trades tomorrow as I'm volunteering. So wanted to move everything down and out to next week and then deal with it.
Instead I wiped out my premiums for the last week and learned a valuable lesson (or two): 1. always check your trade twice before hitting the go button. 2. don't try to roll under pressure to beat the clock.
Live to fight another day! If I have time tomorrow I will look to re-open BPS well OTM for 12/23 and start making my money back. At least - in theory - a loss here or there is good for taxes...
Flehmenlips
Member
In my case, I got in a bit of a trainwreck with selling somewhat aggressive covered calls in late September and then getting stuck in the huge run up in October. I got my shares called away at $840-$900 and then I immediately bought back in the $1150 range, fully leveraged on margin. My timing could not have been worse. Things got pretty ugly, but the protective put has turned a super stressful situation into a relatively positive one. I even made some decent premium on the put today when I was able to roll it to a lower strike for next week. My portfolio is 100% TSLA. (yikes!)
Flehmenlips
Member
In fact, the protective put, combined with the credit I received when I rolled it, allowed me to buy some more shares at today's low price helping a little with my cost basis. Super scary cuz I'm even more leveraged on margin, but hoping for the best. I'm open to any insights on how to continue to reduce my cost basis from $1150-ish.
Flehmenlips
Member
Another thing I learned is about what the portfolio risk management folks call PNR, or Point of No Return. You can simulate different put strikes and watch how it affects your PNR. It is possible to get it to the point where your account is protected all the way down to a zero stock price, if I understand it correctly. Essentially, you are buying fire insurance.
Haha this happened to me yesterday. Opened Bear instead of bull. Stock went up and my spread went down, closed it out immediately for minimal damage.
Random advice I’m looking for: I have 250K cash sitting in my IRA waiting for an opportune moment like this. Any specific recommendations on one year LEAPS? I like to trade in and out of LEAPS. Thanks
Last couple days have been busy!
- Closed the 50x 830/780 at 80% gains;
- Closed the 50x 850/900 at 95%+ gains (effectively 80% gain relative to net cumulative credit sold; since this was a rolled position);
- Rolled the 11x 1050 12/17 LCC to 11x 1170 12/23 LCC for a small credit (this realized a nice 85% gain relative to original sold credit);
- Will let the 6x 805 CC get assigned and thus pocket 100% of the sold premium;
- Flip-rolled the 6x 800 CC to 12x 1050/775 BPS 04/2022; reason for the 2x contract count was that I am taking premium from the sold BPS to fund the remaining market value on the 6x 805 CC in my other account;
- Sold 830/780 BPS 12/23 at average 2.9; will likely add to these after I do...
- Manage the 920/870 BPS tomorrow; I'd like to close it rather than roll it to have a clean slate on margin buying power;
- Begin buying back in to leaps and shares with all that cash sloshing around;
- Reset on number of ICs I am selling on a weekly basis once I've repositioned;
So.. I have BPS -1150/+950 expiring tomorrow. It's completely ITM now. This all started from being too aggressive, and then Elon sales, stock crashing.. well it is what it is. I could close it now and it's about -100% loss. Rolling this spread so far, I've gotten about $100 credit/contract.
Obviously rolling to same strikes would be a debit roll. And rolling further out in time actually causes bigger debits, long leg gains more value.
Looks like I can roll for credit to 12/23 -p1250/+p1050. It will decrease the margin in the spread. Going deeper itm will get long and short deltas closer.
Thoughts? Taking the max loss would be about one month worth of profits, so while painful, it's not that bad. But if I can roll for credit, I think it's worth a try..
Obviously rolling to same strikes would be a debit roll. And rolling further out in time actually causes bigger debits, long leg gains more value.
Looks like I can roll for credit to 12/23 -p1250/+p1050. It will decrease the margin in the spread. Going deeper itm will get long and short deltas closer.
Thoughts? Taking the max loss would be about one month worth of profits, so while painful, it's not that bad. But if I can roll for credit, I think it's worth a try..
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I will suggest the same thing I suggested to @bkp_duke. It is at max loss so let it ride even if there is only one day left. Close if there is a spike tomorrow. Otherwise just open new BPS as the stock continues to tank.
Rolling for the credit is certainly nice, but you'll also be moving your target price up to 1250 from 1150. 1250 is ATH territory - that'll be a really positive view on how the share price will move. Alternatively you'll be moving up the strike at which you start lowering the max loss from 950 to 1050.
You'll be increasing your odds of a max loss - then again you're already at that point. You will also be making it harder for the share price to recover and at least shave off SOME of that loss.
A question to ponder - if you bought out / realized the loss right now, what would you do for a new position? In a sense you've been paying off this loss for the last month, so you'd get to start off with a clean slate - is that a better place to be?
You can certainly realize a big position improvement on a position that is so far ITM, but if you don't get that big move, then you've earned an incremental $1/share ($100/contract) while you await the max loss and hope for a big increase in the share price. Except now you need a $1250 share price (max gain) instead of a $1150 share price.
NOT-ADVICE.
If I had that position then I would hope for a pop first thing tomorrow that takes the shares above 950 and presumably provide you with a (slightly) less than max loss. Then take what gets offered and move on (max loss or not). I would definitely act well before closing, as early assignment becomes more and more of a thing as the close of trading arrives.
Or at least roll earlier than later - you're far enough ITM and close enough to expiration that early assignment on the short options is already a thing.
If the shares open down then eat the loss and open a new BPS priced where you would want it to be, and start earning back that loss.
Thanks @adiggs. I've learned a lot from you in the past so I appreciate you chiming in.I'm a buy and hold and option selling investor in TSLA, so my buying call options input is, at best, suspect
That being said, I do buy and hold long dated calls (such as those 2023's you mentioned), partly to back covered calls so I can sell even more of them. Thus I purchase DITM calls, and those have been working well.
I divide the world up into share replacement calls (DITM) and speculative calls. The speculative side - I got nothing. Then again I think you're asking more about share replacement options anyway. For these the deeper ITM and the further out in time, the more and more that they look like share replacements.
One of the ways I choose is to go out to the furthest available strike (Jan 2024 right now I believe) and then look for the strike that is priced at about 1/2 of the share price. For these options I can buy 2 of them for the cost of 100 shares. Those 2 options will be around the .80 or .85 delta, so I end up with around 1.6 to 1.7 leverage, or 160 to 170 share equivalents vs. the 100 shares I'd have from owning 100 shares.
I might also lower the cost (increase the strike) on the purchased calls so that I get more like 5 options for 200 shares - that turns into something like .80*5 = 400 shares vs. 200 share equivalents. That higher strike / lower cost option gets me closer to 2:1 leverage.
The first choice minimize the amount of time value I'm purchasing. That minimizes my Theta exposure (time value decay) as well as Vega exposure (changes in the option price due to changes in IV) as both of those affect the extrinsic or time value on the option I'm buying, and have no impact on the intrinsic value (the $ amount ITM).
Those long dated calls also have the possibility, assuming a taxable account, of reaching long term capital gains status.
There are some other more generic option trading threads here in the forum, though not nearly as active as you've seen. Option Trading Strategies & Advice is the name of one I think; Advanced Option Trading.. is another. You'll have to search for them though.
EDIT to add: and welcome! We don't bite, and like it when new folks show up.
Yes, you addressed my question perfectly. Share replacement calls is what I'm considering. Not a YOLO. More a case of strong conviction that the SP is undervalued and I expect it to increase dramatically over time. But I don't have any more dry powder to keep adding shares. You mentioned 2-2.5 LEAPs per 100 shares of stock. That seems like a good compromise of the type of leverage I'm looking for (I was initially looking at 3x). All my options are in an IRA account, so tax implications are immaterial. Going to out Jan 2024 seems like a sound approach.
Looking at Jan 2024, I can sell 100 shares and get either (1) two c610s or (2) three c1000s. While I understand Delta, Theta, Gamma and Vega at a high level, I don't understand it at the level I'd like to use those to help me pick one over the other. I do understand your point about the impact of these on the ITM versus OTM portions of the option. The first option seems like a no-brainer to me. Very low risk. The second option would provide much greater returns if the SP goes where I think it should between now and Jan 2024.
I can work through breakeven analysis and what the values of both would be at different SP levels. So far, that's what I've been doing. I guess that's what you're suggesting.
Thanks for the names of other threads.
Have you looked at split flip rolling ?
Take half the contracts and flip roll to a BCS, roll the other half to a BPS. Ideally in a way that you now have an Iron Condor/Fly/Butterfly. Benefit is you cut your margin req in half and you « guarantee » that you can recover at least half the position if not more depending on what kind of width you can achieve in strikes.
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