Wiki Selling TSLA Options - Be the House

[OrthoSurg]

curious too about those 20/1/2023 1500 puts.
what's the collateral for margin for these?
if it's stock, what will you do if we get a black swan and 50% drop?
oh sorry, looks like you will have enough margin to cover even with a 50% drop?

I was early assigned before the new year, happened with short ditm puts and 2 days before expiry. No timevalue left. Actually these were BPS, and even the long leg was itm so I could sell that to mitigate.. now I still hold the shares that were put to me. Waiting for ER rally to sell them.

I have the cash on hand in another account in my holding company. So a 50% drop is not a problem for the number of contracts I sold. It would be a different story if I sold more. I try to play safe and be able to manage losing positions if things gets sour.

It initially showed a 500k margin requirement impact and overnight adjusted to 870k. A little bit lower than the max loss but still locking a lot of margin for weeklies. Might be less interesting overall. It will require less short term management but will It beat income made from selling weeklies? I don’t thing so.

 

[scubastevo80]

Please excuse this noob question, but could you guys explain with a couple of examples rolling BPSs? And how a wider spread makes that easier? I totally understand the short position and trying to anticipate the lowest the SP could go before it gets into the money. And I understand the cash collateral requirements.

Real world example: I am sitting on a 1/21 +1050/-900 BPS. When would I want to consider rolling this? One example would be if the SP gets down to say $1050 by 1/19. What would the experts here do? Would you roll just the expiration dates in anticipation of SP rising? And how does having wider spreads help with ability to roll for net credit?

Just to be clear, did you buy the +1050 and sell the -900 (put debit spread), or was this supposed to be -1050/+900? If the latter, my not advice would be to wait until theta decays enough where you're happy to roll to 1/28 for a credit. We've been closing out at 80% profit and then rolling (or opening) somewhere between 5-9 days from expiry. In your example, we'd roll out to 1/28 right before the price touched $1050 and make sure we get strike improvement and a credit. Given our view of SP direction, we'd probably look at minimal strike improvement ($10 on the strike) and higher credit. If I had less conviction, I'd go the other way around (max strike improvement at a credit).

If the former, your bet was that price would go down and rolling this out would just continue to cost you money. If you believe SP will trend up, not sure I understand this trade.

 

[corduroy]

I'm curious about the 20/1/2023 -p1500. How much of a margin impact did it have? I have some home upgrades I want to do, and my bank won't extend a HELOC to me (they don't have the staff due to covid), so was looking for options before hitting the internet.

If you don't want to tie up any margin you could sell long dated CCs to raise cash. Jan 2024 $2,200 strikes are going for about $200 each (I think they were $250 on Monday). I would be OK letting go of a few shares at $2,200, and if the SP doesn't get there that's decent premium of around $2/week all up front.

 

[Knightshade]

Please excuse this noob question, but could you guys explain with a couple of examples rolling BPSs? And how a wider spread makes that easier?

Generally you can roll a put spread for a net additional credit (or at least not a loss) up until the stock price hits the halfway point of your spread.

A $100 spread means it can go 50% ITM before you have to worry about not being able to roll without a loss. A $20 spread it'd only be able to go $10 ITM before that's true.

So for example yours (assuming you meant -1050/+900) could go to roughly $975 before you'd have to roll at a loss.

So wider spreads means it can get deeper ITM on the short leg before you're in real trouble on the roll.

As to WHEN to roll.... varies by person and situation.... usually the nearer expiration you can wait the better for the roll (more theta has burned off the spread you're holding compared to the one you're gonna roll out to)

 

[jw934]

If you don't want to tie up any margin you could sell long dated CCs to raise cash. Jan 2024 $2,200 strikes are going for about $200 each (I think they were $250 on Monday). I would be OK letting go of a few shares at $2,200, and if the SP doesn't get there that's decent premium of around $2/week all up front.

I've got bitten badly by selling far-far out of money covered LEAPS in 2020. As a HODLer, never going to that again with Tesla.

 

[ZeApelido]

I used to sell Puts more than a year out (thinking incorrectly that those would be taxed as long term gains). I don't do it anymore because it ties up too much margin (use a margin calculator to see how much it will be before you sell) that I can use to make more money with on weekly BPS. However, if you want more money upfront and are ok with tying up margin for a long time, they are far less stressful. The way I assess assignment risk (I don't know if it is the best way) is to look at the difference between the ITM SP and the strike. If that difference is greater than the Put premium, it typically won't get assigned. Example - sell a 1500 strike and the SP is at 1000. If the premium is $750(00), then there is $250(00) of extrinsic value and it won't get assigned, but If the premium is $500(00), watch out.

If considering longer term options, one benefit of narrow spreads (e.g. 600/800) vs very wide or naked puts is that the theta decay is more spread out depending on where the strike price is.

For instance, for my 600/800 Jan 23 BPS, if the stock price stays flat from here on, the premiums will drop so that I 'earn' ~$6k a week in January. By April that increases to ~$7.5k a week. It peaks in August at ~ $12k. Then begins to decrease again.

If the price moves up to say $1500, it becomes a very flat weekly gain (until almost full value gained by October). Conversely if the price stays at $900, it only gains most value near the end.

So depending on your leg positioning and what you think the share price will be over the year, you don't have to hold the BPS until expiration to be gaining value. And my example the premium is enough that you could leverage out ~30-40% more contracts because of the upfront premium.

 

[BornToFly]

Generally you can roll a put spread for a net additional credit (or at least not a loss) up until the stock price hits the halfway point of your spread.

A $100 spread means it can go 50% ITM before you have to worry about not being able to roll without a loss. A $20 spread it'd only be able to go $10 ITM before that's true.

So for example yours (assuming you meant -1050/+900) could go to roughly $975 before you'd have to roll at a loss.

So wider spreads means it can get deeper ITM on the short leg before you're in real trouble on the roll.

As to WHEN to roll.... varies by person and situation.... usually the nearer expiration you can wait the better for the roll (more theta has burned off the spread you're holding compared to the one you're gonna roll out to)

On the when to roll part.... That is the problem I had when using narrower spreads. Because a dropping SP quickly puts you in max loss territory, or half way into your spread where you can't roll without a debit, I would have to roll narrow spreads earlier (or just buy them back earlier) which meant more losses. For example: If you opened a +850/1100 and believe 1000 is a firm floor, you could let the SP comfortably go to 1000 and keep rolling ITM at the same strikes for credit. If you had opened 5x 1050/1100, you should be freaking out as the SP get close to 1100 and crying yourself to sleep at 1050 (because you are at max loss and can't roll without a large debit).

 

[stealthyc]

I used to sell Puts more than a year out (thinking incorrectly that those would be taxed as long term gains). I don't do it anymore because it ties up too much margin (use a margin calculator to see how much it will be before you sell) that I can use to make more money with on weekly BPS. However, if you want more money upfront and are ok with tying up margin for a long time, they are far less stressful. The way I assess assignment risk (I don't know if it is the best way) is to look at the difference between the ITM SP and the strike. If that difference is greater than the Put premium, it typically won't get assigned. Example - sell a 1500 strike and the SP is at 1000. If the premium is $750(00), then there is $250(00) of extrinsic value and it won't get assigned, but If the premium is $500(00), watch out.

At least with Thinkorswim you can just turn on the column "Extrinsic Value" so you can see what is remaining in your positions without having to think about it. I would think that other apps might have something similar

 

[BornToFly]

I sold some June2021 p800s in January when the SP was 850, unfortunately used the premiums and couldn’t buyback. SP dropped all the way to 550 and I was never assigned early. Won’t say it can’t happen.

6 month Puts that go that far in the money could definitely get dangerous as you near expiration. Again, pay attention to the difference in value between the premium and the strike-SP. Avoid assignment by rolling out another 6 months if there isn't much extrinsic value on top of the strike-SP difference.

 

[st_lopes]

Clipped 1400/1450 BCS at 80% on the down swing at open.

Still have 1390 cc/lcc, 1050/1000 BPS, and 1200/1150 BPS (this last set from rolling back an 04/2022 1050/775 BPS).

No planned trades today, though BTC orders on 1390 are in at 80% if we get another round of downward movement.

Game plan on 1050 BPS is to clip at 80% or higher tomorrow.

TBD on 1200 BPS, currently thinking a one week roll and $10 spread increase for a credit, but we’ll see what the next couple days bring. Other option is to again roll back out, widen spread, improve strike, change contract number or some other combination. Too many options right now

 

[Ad Astra]

Sitting on two positions that were opened during the slide yesterday with expiry of 1/14:

-1100/+1000
-1070/+970

I suspect I’ll be managing these diligently given the MM’s shenanigans. I don’t know if my tinfoil hat is on too tight but the intense pull back yesterday seems like a very good opportunity for some big money to move in before earnings.

As an anecdote, I was speaking with a buddy who works at Tesla about potentially purchasing an inventory MS and he mentioned to me how demand across the vehicle lineup was insane (MY in particular; something about hotcakes). He also mentioned that they were not offering much in the way of discounts, even on their test drive vehicles.

 

[wooter]

My jan7 1045/870p's closed. I'm waiting to close my jan7 1300/1400bcs for +80%, and have set up 2x jan14 1100/980bps.

Most frustrating thing about options trading is that it's like... Once or twice a week you can do something. And then it's just a waiting game.

 

[BornToFly]

Question - Can I hold Adiggs (who started this thread) liable for my tax bill next year? We are 5 days into the new year. If this keeps up, I'm going to be second to Elon on taxes paid....

 

[FS_FRA]

Opened 1/14 -990/+790 BPS @ $5

 

[BornToFly]

Opened 1/14 -990/+790 BPS @ $5

Should be very safe. I don't have that much self control at the moment....

 

[FS_FRA]

Should be very safe. I don't have that much self control at the moment....

Considering this is week 1 of 52, and this trade doubles my normal monthly working income, I'm pretty happy to be exhibiting that much self-control

 

[BornToFly]

Question - Can I hold Adiggs (who started this thread) liable for my tax bill next year? We are 5 days into the new year. If this keeps up, I'm going to be second to Elon on taxes paid....

View attachment 752225

OK, full disclosure. I did not actually make $4M in 5 days. I closed over $3M in profitable spreads on December 31st and they didn't settle until a couple days ago, so they count as 2022 income. At least I can use the money I would have had to pay in taxes for 2021 to back more spreads for all of this year, and then pay the tax 13 months from now with only a small penalty (my "Loan payment").

 

[WattsHappening]

Just to be clear, did you buy the +1050 and sell the -900 (put debit spread), or was this supposed to be -1050/+900? If the latter, my not advice would be to wait until theta decays enough where you're happy to roll to 1/28 for a credit. We've been closing out at 80% profit and then rolling (or opening) somewhere between 5-9 days from expiry. In your example, we'd roll out to 1/28 right before the price touched $1050 and make sure we get strike improvement and a credit. Given our view of SP direction, we'd probably look at minimal strike improvement ($10 on the strike) and higher credit. If I had less conviction, I'd go the other way around (max strike improvement at a credit).

If the former, your bet was that price would go down and rolling this out would just continue to cost you money. If you believe SP will trend up, not sure I understand this trade.

Oops, my mistake. I meant -1050/+900.

Thanks for your explanation. So do you mean you would roll both ends of the position to 1/28? And then roll to -1040/+900? Assumption being the $10 strike price improvement is more than offset by the extra week?

 

[WattsHappening]

Generally you can roll a put spread for a net additional credit (or at least not a loss) up until the stock price hits the halfway point of your spread.

A $100 spread means it can go 50% ITM before you have to worry about not being able to roll without a loss. A $20 spread it'd only be able to go $10 ITM before that's true.

So for example yours (assuming you meant -1050/+900) could go to roughly $975 before you'd have to roll at a loss.

So wider spreads means it can get deeper ITM on the short leg before you're in real trouble on the roll.

As to WHEN to roll.... varies by person and situation.... usually the nearer expiration you can wait the better for the roll (more theta has burned off the spread you're holding compared to the one you're gonna roll out to)

Thanks. I've read the 50% ITM comment several times. So let's say the SP gets to $975 on 1/21. And I decide to roll. What new position would you roll into?

 

[wooter]

Sitting on two positions that were opened during the slide yesterday with expiry of 1/14:

-1100/+1000
-1070/+970

I suspect I’ll be managing these diligently given the MM’s shenanigans. I don’t know if my tinfoil hat is on too tight but the intense pull back yesterday seems like a very good opportunity for some big money to move in before earnings.

They're close, but I cannot really imagine they going tits up next week.

I'm more scared of blowout jumps than drops.