Wiki Selling TSLA Options - Be the House

[st_lopes]

May be slightly OT for our US friends, but for the rest of us whose home currency is not USD, I finally decided to try Norbert's Gambit in order to convert some USD to CAD and back-again (was moving funds between different accounts). It was shockingly straightforward and seems to be a very simple way to save on the FX spread that many brokerages take (very quietly... often 1-2% of your cash amount... each direction).

In this particular case I was moving $200k CAD, which on a round trip would have cost nearly $8k CAD in FX conversion fees. With Norbert's Gambit, it came down to just under $200 (ECN fees and commission on trading the DLR.TO and DLR.U.TO ETF). The only risk appears to be the opportunity cost of time in market. You do need to wait for the trades to settle before funds can be deployed in their new currency.

Source: Norbert's Gambit: The Cheapest Way To Trade US Dollars

 

[GeoX750]

That's why the most popular New Year resolution on this thread was:
"In 2022 I'll choose safer/wider/further OTM strikes". If you have $300 wide strikes, today's action means very little.

One of the counterintuitive things I learned here--I was always under the assumption that narrower strikes/spreads were safer.

With a volatility like TSLA, wider is definitely better for $$ up front (as long as you have the margin) and rolling when necessary.

 

[jeewee3000]

May be slightly OT for our US friends, but for the rest of us whose home currency is not USD, I finally decided to try Norbert's Gambit in order to convert some USD to CAD and back-again (was moving funds between different accounts). It was shockingly straightforward and seems to be a very simple way to save on the FX spread that many brokerages take (very quietly... often 1-2% of your cash amount... each direction).

In this particular case I was moving $200k CAD, which on a round trip would have cost nearly $8k CAD in FX conversion fees. With Norbert's Gambit, it came down to just under $200 (ECN fees and commission on trading the DLR.TO and DLR.U.TO ETF). The only risk appears to be the opportunity cost of time in market. You do need to wait for the trades to settle before funds can be deployed in their new currency.

Source: Norbert's Gambit: The Cheapest Way To Trade US Dollars

My method for this is to have a EUR account and a USD account with my broker. All my options selling/buying happens with the USD account so I don't pay any conversion fees.

Only when I want to take USD to EUR (either within my broker or to a bank account of mine) , then I pay the conversion rate fees. Saves a lot of $$.

 

[ammulder]

That's why the most popular New Year resolution on this thread was:
"In 2022 I'll choose safer/wider/further OTM strikes". If you have $300 wide strikes, today's action means very little.

It’s not today that was the problem. It was today (this morning) plus yesterday plus the day before. Earlier we were at what, several percent below before the P&D announcement? If you place a trade a week out and then it dumps $170 in three days post-brilliant delivery report, you start to wonder what the next few days may hold. Whoever is selling is clearly not selling because of any issue with the company or it’s fundamentals, so how do you then predict what’s safe? Very frustrating. You can roll a $300 wide spread for strike improvement after a $170 dump, but even the “better” position doesn't leave you very far out of the money when considering multiple consecutive -5% days. Sigh.

 

[MikeC]

I sold 10x 1/14 -p1000/p900 on Monday and it's obviously way down. So I rolled the long leg down to 800p - I got a credit of $2 to make a safer spread.

 

[st_lopes]

My method for this is to have a EUR account and a USD account with my broker. All my options selling/buying happens with the USD account so I don't pay any conversion fees.

Only when I want to take USD to EUR (either within my broker or to a bank account of mine) , then I pay the conversion rate fees. Saves a lot of $$.

Good point. Accounts in Canada can hold both USD or CAD and trades can settle in either the account currency (CAD) or trade currency (USD). So, same benefit once you have the currency available in USD. Gambit would be more for funding or withdrawals to and from accounts.

 

[Flehmenlips]

I rolled all of my BCS from 7 Jan to 14 Jan for smallish credits and modest spread improvements. I feel a little better. This morning was scary.

 

[jeewee3000]

It’s not today that was the problem. It was today (this morning) plus yesterday plus the day before. Earlier we were at what, several percent below before the P&D announcement? If you place a trade a week out and then it dumps $170 in three days post-brilliant delivery report, you start to wonder what the next few days may hold. Whoever is selling is clearly not selling because of any issue with the company or it’s fundamentals, so how do you then predict what’s safe? Very frustrating. You can roll a $300 wide spread for strike improvement after a $170 dump, but even the “better” position doesn't leave you very far out of the money when considering multiple consecutive -5% days. Sigh.

True.

This week is indeed one of those exceptional ones, where even the most safe plays can turn out ugly if not managed carefully. Only pure covered calls or cash secured puts are truly "safe" option plays on weeks like this.

 

[traxila]

To me far OTM is 20% or more.

That would've been a -950 even opening near the very very top on Monday.

I wouldn't have been especially stressed at all holding those even with the 1020-1030 dip today.

If you're a "10% OTM is conservative" thinker YMMV of course.

Have some BPS, the highest one is Jan 21 910 and it is getting killed. Opened it on a tremendous dip yesterday .

Kinda stressed about all the red in my short terms. Guess my personality needs work.

 

[Flehmenlips]

I rolled all of my BCS from 7 Jan to 14 Jan for smallish credits and modest spread improvements. I feel a little better. This morning was scary.

I also bought my first long term call, a Jun 22 $1200 strike.

 

[WattsHappening]

I'm glad I'm just getting into this. This week has been a great learning experience for me. Luckily, no major damage done on my BPS positions, depending on how tomorrow and next week shake out. And my CCs for tomorrow are going to expire worthless, which at least mitigates a tiny bit of the pain.

Lesson for me: 10% OTM for weeklies is NOT as conservative as one would think.

 

[EnzoXYZ]

Buy cheap OTM Puts. For example I bought an 800P+ for this week for $25 and it added $100k to my margin excess. Experiment with a few and you can make some pretty cheap improvements to your margin position.

Remember only works if you have higher level options approval like 2+ that enables spreads. I was in a pickle at level 1 last March doing naked puts.

 

[kcveins]

I really feel that we will be up significantly post earnings
Taking a gander on 2/4 1075P at $85

 

[Chenkers]

Remember only works if you have higher level options approval like 2+ that enables spreads. I was in a pickle at level 1 last March doing naked puts.

And it also works best with Portfolio margin that tends to do the crazy calculations that yield these sort of margin results.

 

[ABC2D]

I think the whole market could be in trouble if we breakdown through this yearly trend, but, hopefully, we'll bounce up from here

 

[ninpb]

I wanted to take advantage of the dip to 1020 this morning by rolling 1/27 900/800P out to 2/4 but the bid/ask spread was really wide like .34 - 4.

 

[Chenkers]

One of the difficulties in trading a stock like this is knowing how to deal with your conviction in your positions.

My conviction in holding TSLA stock over the years has paid me back, in some cases, a hundred fold.

If you held short term positions with conviction the past four days you have been at the very least stressed out if you opened far OTM conservative strikes, or obliterated with aggressive positions if you did not scramble to contain the damage.

Very different mindsets required.

Trading can be very hard indeed.

There is a kind of conviction also needed for dealing with option positions that are deeply under the water. I've been in situations where the negative option positions would wipe out a massive chunk of my core account value if realised. In these situations you need to carefully manage your margin excess liquidity and do what you need to do to get through. In this case we know that the Q4 earnings report isn't far away when the stock will be better appreciated and the price should rebound. Getting there can include eating into built up cash reserves when rolling for debits or timing a mix of credit and debit rolls to stay afloat. If there's light at the end of the tunnel then it's worth it to preserve your core account value for when the option positions clear.

 

[scubastevo80]

I wanted to take advantage of the dip to 1020 this morning by rolling 1/27 900/800P out to 2/4 but the bid/ask spread was really wide like .34 - 4.

We wrote 1/14 -950/+900 this morning on the dip at $7.70 - they're now up about 50%. While that trade is sunshine and rainbows, the -1050/+960 and -995/+900 that we wrote yesterday are down between 275-300%. I'm confident we start heading up towards earnings, but the macro drag may force us to roll one or both of these at some point in the next 6 trading days.

 

[CHGolferJim]

I also bought my first long term call, a Jun 22 $1200 strike.

That should pay well for you. I made 116% on a 12/14 purchase of 031822C1100 (as SP climbed from $950 to $1100; sold 3/4 of it 12/27 at +100% and the rest on 1/3 at +140%), and I'm looking at buying 052022C1200 tomorrow AM. Recommend setting limit orders to sell at specific levels and being flexible as new information is revealed, and take profits - they can disappear in a moment. This is how I rage buy!!

 

[scubastevo80]

There is a kind of conviction also needed for dealing with option positions that are deeply under the water. I've been in situations where the negative option positions would wipe out a massive chunk of my core account value if realised. In these situations you need to carefully manage your margin excess liquidity and do what you need to do to get through. In this case we know that the Q4 earnings report isn't far away when the stock will be better appreciated and the price should rebound. Getting there can include eating into built up cash reserves when rolling for debits or timing a mix of credit and debit rolls to stay afloat. If there's light at the end of the tunnel then it's worth it to preserve your core account value for when the option positions clear.

This happened to us the last week of December on BCS. We ended up closing at a big loss (most made back) but we would have had better outcomes if we took one of two paths (1) roll out and then close during yesterday or today's massive drops or (2) close the losers much earlier. I knew the trade was bad the second we took the premium and started to march aggressively towards our lower strike. I should have just cut ties on day 1, but instead waited to day 3 taking 5 times the loss versus when I was first became uncomfortable.

There are real lessons in these types of losses... protect principal at all costs and don't be afraid to take a loss. I love reading posts in the main thread about those folks that supposedly hit double/triples/homers 9 times out of 10. I don't think that's a reality and we'll take singles (1-2% premium/week) 9 times out of 10 so long as we're staying risk averse.