Wiki Selling TSLA Options - Be the House

[st_lopes]

This was an annoying week.

Early assigned on 53x 1100/960 BPS. Now sitting on those 5300 shares with married puts. Rolled the married puts to 940p 02/11. Tried to reverse the assignment and roll them back to BPS, but brokerage wouldn’t allow for it. Turns out they consider very different margin requirements on those two positions even though they are basically the same delta exposure and would require just as much margin to enter. Issue is that the married puts maintenance requires more given the circularity of the margin on the shares that you now own. Whereas BPS “fixes” your initial and maintenance. The more annoying part is I’m now paying interest to own the shares, whereas I would not be on the BPS.

Moral of the story. Don’t be an idiot and wait for last day to roll. I knew that. But I was still an idiot.

I rolled the other 37x 1100/960 to 37x 1120/970 02/11.

I do find the price action this week encouraging both on TSLA and macros. We have broken a resistance trend line on TSLA and QQQs are sitting right at 360 with what appears to be the bears running out of steam. This could be the make or break week on what our medium term trend will be.

 

[OrthoSurg]

Why are people widening their spreads? I’m narrowing mine to lower the short leg significantly and raising the long leg a few strikes. I’ve found I can do this and it’s only slightly raising the mid point.

I understand that max loss can happen faster this way, however the stuff I have done this with, I was already facing max loss, or close to it.

From what I understood you can roll for a credit up to midpoint. So the wider your spread is the more time you have to act if the SP goes against you.

 

[JustMe]

Why are people widening their spreads? I’m narrowing mine to lower the short leg significantly and raising the long leg a few strikes. I’ve found I can do this and it’s only slightly raising the mid point.

I understand that max loss can happen faster this way, however the stuff I have done this with, I was already facing max loss, or close to it.

Widening the spread can turn a position that is unprofitable to roll sideways to one that can be rolled sideways for a profit or down and out of the money for no cost.

Example: 2/11 $1,000/$900 bps, approaching max loss with TSLA at $930

Approximate Friday close prices of this position for different exp dates
2/11 $63
2/18 $60
2/25 $58.50
3/4 $58

If the share price stays the same it costs a couple of dollars per share to roll the position every week.

If this position was widened by $200 to a $1000/$700 bps, here are the prices for for upcoming exp dates

2/11 $82
2/18 $90
2/25 $95
3/4 $100

In this case, the position can be rolled for more than $5/share credit every week if the share price remains the same. Or gradually rolled down in strike until it expires OTM.

So widening the spread can be a profitable strategy if the share price remains flat or trends up. *However* if the share price falls, the position risks 3x the max loss of the original position.

*edit* -> another alternative would be to roll the position down and out immediately. For example, the 2/11 1000/900 bps could be rolled to 3/25 900/600 for $1 credit. This new position would be rollable for credit if the share price remains above the midpoint of $750

 

[OrthoSurg]

This was an annoying week.

Early assigned on 53x 1100/960 BPS. Now sitting on those 5300 shares with married puts. Rolled the married puts to 940p 02/11. Tried to reverse the assignment and roll them back to BPS, but brokerage wouldn’t allow for it. Turns out they consider very different margin requirements on those two positions even though they are basically the same delta exposure and would require just as much margin to enter. Issue is that the married puts maintenance requires more given the circularity of the margin on the shares that you now own. Whereas BPS “fixes” your initial and maintenance. The more annoying part is I’m now paying interest to own the shares, whereas I would not be on the BPS.

Moral of the story. Don’t be an idiot and wait for last day to roll. I knew that. But I was still an idiot.

I rolled the other 37x 1100/960 to 37x 1120/970 02/11.

I do find the price action this week encouraging both on TSLA and macros. We have broken a resistance trend line on TSLA and QQQs are sitting right at 360 with what appears to be the bears running out of steam. This could be the make or break week on what our medium term trend will be.

What is your plan with those 5300 shares? Sell agressive CCs against this position? My cost basis is low so if I get underwater Puts early assigned the tax hit would be disastrous because we don’t have the option to choose which shares to sale in Canada as far as I know compared to US. That’s one of the reason I want to transfer to IBKR for the 1.05% margin rate instead of the 3.75% charged by big Canadian banks. The interest rate become pretty significant the higher the number of contracts in case of an assignment. I am trying to figure out what I would do if I was in your situation. My premise is that we are in a more probable scenario to go back into a bull market in the 3-4 next months.

 

[st_lopes]

What is your plan with those 5300 shares? Sell agressive CCs against this position? My cost basis is low so if I get underwater Puts early assigned the tax hit would be disastrous because we don’t have the option to choose which shares to sale in Canada as far as I know compared to US. That’s one of the reason I want to transfer to IBKR for the 1.05% margin rate instead of the 3.75% charged by big Canadian banks. The interest rate become pretty significant the higher the number of contracts in case of an assignment. I am trying to figure out what I would do if I was in your situation. My premise is that we are in a more probable scenario to go back into a bull market in the 3-4 next months.

I’m lucky in that my low cost basis shares are in registered accounts. So these shares actually have a near 1100 cost basis. I do plan to sell CCs eventually, but not while this feels like a coiled spring though, and also need to unpack how CC’s would work against married puts.

Currently I have to keep the bought puts because otherwise I instantly get margin called on the 5300 shares. They’re effectively acting as protective puts to any price downside on the 5300 shares.

 

[Blue horseshoe]

I’m lucky in that my low cost basis shares are in registered accounts. So these shares actually have a near 1100 cost basis. I do plan to sell CCs eventually, but not while this feels like a coiled spring though, and also need to unpack how CC’s would work against married puts.

Currently I have to keep the bought puts because otherwise I instantly get margin called on the 5300 shares. They’re effectively acting as protective puts to any price downside on the 5300 shares.

Personally I'd be more concerned about the downside than riding any upward uncoiling of the spring. Maybe sell CC for half the shares?

It's not a terrible position to be in as you can keep marrying your shares with put positions until the share price resumes its upward trajectory.

 

[st_lopes]

Personally I'd be more concerned about the downside than riding any upward uncoiling of the spring. Maybe sell CC for half the shares?

It's not a terrible position to be in as you can keep marrying your shares with put positions until the share price resumes its upward trajectory.

After doing some homework. Selling CCs would basically make it a collar. Not a bad idea. I could just keep selling them at 1100 strikes since that would be where I get to unwind the whole thing and crystallize all my cumulative premium profits anyways. Would be a nice way to offset the cost of maintaining the married puts.

 

[TheTalkingMule]

Why are people widening their spreads? I’m narrowing mine to lower the short leg significantly and raising the long leg a few strikes. I’ve found I can do this and it’s only slightly raising the mid point.

I understand that max loss can happen faster this way, however the stuff I have done this with, I was already facing max loss, or close to it.

I was rolling fully ITM BPS to buy time for SP to recover without actually paying debit and to take midpoint lower so any additional rolling can hopefully be done at a credit.

I think a pro likely closes positions and starts over. I'm protecting my original cash margin by adding more cash margin to the position and lowering the long leg.

 

[EVCollies]

I was rolling fully ITM BPS to buy time for SP to recover without actually paying debit and to take midpoint lower so any additional rolling can hopefully be done at a credit.

I think a pro likely closes positions and starts over. I'm protecting my original cash margin by adding more cash margin to the position and lowering the long leg.

I'm rolling too but converted to cash tiring of adding more to cover margin.

 

[OrthoSurg]

So I could be wrong with this prediction (3rd blue line), but look at the similarities to the last two big selloffs. TSLA rallies away from the channel, and then drops right back in, where it then grinds higher in the lower portion of the channel until the next breakout. Macros are worse than last time, but TSLA's business is stronger - That might even things out.


View attachment 764817

Do you consider the lower low of the candle to be a breakout of the channel? When do you consider adjusting your channel with a slower slope? Do we consider it as a false breakout? ;P

 

[ChefBoyardee]

Do you consider the lower low of the candle to be a breakout of the channel? When do you consider adjusting your channel with a slower slope? Do we consider it as a false breakout? ;P

The channel has been tested many times, so I think it’s the more reliable thing to look at and the intraday dip below is more irrational capitulation than a breakout. But if we were to close below for multiple days or macro got much worse I’d re-assess it.

The other thing is Tesla is growing exponentially while this channel is linear, so it won’t stay accurate forever but the breakout should be to the upside. I expect periodically we’ll enter new channels with steeper slopes.

 

[wooter]

I had a rough time after ER and the IBKR nanny and decimated my margin, so I can not put in wide spreads.

I put in a 840/825bps and 1020/1060bcs mid last week for expiry 11/02 and they are looking good.

 

[jeewee3000]

I had a rough time after ER and the IBKR nanny and decimated my margin, so I can not put in wide spreads.

I put in a 840/825bps and 1020/1060bcs mid last week for expiry 11/02 and they are looking good.

View attachment 765943

Careful. Small spreads (i.e. under $50 wide) were a major issue early summer 2021 if I recall correctly.

This was before wider spreads ($100 at minimum) were common over here. Many went 100x 1000/1020 for example, which can lead to trouble when sugar hits the fan.

I know your strikes are quite far out, but $1020 is easibly attainable the moment growth stocks are back in favor.

 

[jeewee3000]

My positions for this week:

-850p/+750p

-1050cc's. (no spreads so infinitely rollable if I need/want to)

 

[juanmedina]

Sold some 1070cc's from $1.8-2.6

 

[ninpb]

Got some 2/11 BPS.
- 900/800 that got rolled here, first opened end of January. This was my first experience with being ITM. Almost rolled again the last two weeks but just held.
- 700/600 opened last week
- 780/680 opened today

 

[CHGolferJim]

I’m sorry to see the troubles folks have had with puts and spreads since ER, and have to say I’m now in no hurry to learn about puts and spreads, just keep chugging along with CC Strategy (writing aggressive strikes against 2 buy-writes = 1/3 of total shares, no shares assigned so far; writing ~$150 OTM strikes against ~45% of core holdings). Total YTD (5 weeks) ROI = 3.3%, 40% annualized and something like 4x operating expenses.

Early today at the frequent Monday AM peak, wrote 021122C975 at $16.94 and 021122C1075 at $2.22; lost about $5k I could have gotten 2/1 if I’d sold the same CC at market rather than trying to nudge price with limit orders.

 

[BornToFly]

Got some 2/11 BPS.
- 900/800 that got rolled here, first opened end of January. This was my first experience with being ITM. Almost rolled again the last two weeks but just held.
- 700/600 opened last week
- 780/680 opened today

Thou shall not covet thy neighbors BPSs....

 

[BornToFly]

I’m sorry to see the troubles folks have had with puts and spreads since ER, and have to say I’m now in no hurry to learn about puts and spreads, just keep chugging along with CC Strategy (writing aggressive strikes against 2 buy-writes = 1/3 of total shares, no shares assigned so far; writing ~$150 OTM strikes against ~45% of core holdings). Total YTD (5 weeks) ROI = 3.3%, 40% annualized and something like 4x operating expenses.

Early today at the frequent Monday AM peak, wrote 021122C975 at $16.94 and 021122C1075 at $2.22; lost about $5k I could have gotten 2/1 if I’d sold the same CC at market rather than trying to nudge price with limit orders.

Well, it does help that the stock has dropped since the beginning of the year.... We were doing great with BPS for the last 6 months of 2021....

 

[CHGolferJim]

Well, it does help that the stock has dropped since the beginning of the year.... We were doing great with BPS for the last 6 months of 2021....

Yes, of course, both comments are . I post these updates merely to highlight that a very cautious options strategy can also be rewarding. I certainly envy the massive returns you and others are achieving, but can’t say I would trust myself or be comfortable with the risks.