Is NATO getting dragged into the war priced in? Russia has now fired on Belarus pretending to be Ukraine to get them to join. Chernobyl reactor might be weaponized by Russia. The West may be forced to step in soon. I can't decide if I sell 1/3 of my shares now to protect myself from a margin call below 700. I was planning on selling those shares at 1200, so that would be a 50% loss compared to 9 months from now (assuming we are higher in 9 months). None of this would be an issue if I hadn't done BPS in January that had to be rolled to December (If I only had shares I could have just watched the SP drop to 300 without a problem). My jump into the BPS world might end up costing me a lot!
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
i did some further research and
- made my spreadsheet smart enough to recognize if market is closed on Mon or Fri (ie short week)
- collected data for 1 year (march 11, 2021 to march 10, 2022)
- BPS: if one is trading only 4-5 DTE (ie no open positions on weekends), it looks like 20% OTM is safe (march 11, 2021 to march 10, 2022). The lowest drop is -16.95% intraweek. This is derived from Mon HIGH against Fri CLOSE. Note: if Fri market is closed, i looked at Thu data. Same for Mon/Tue.
- CC/BCS: if one is trading only 4-5 DTE (ie no open positions on weekends), it looks like 20% OTM is safe (march 11, 2021 to march 10, 2022). The highest rise is 16.27% intraweek. This is derived from Mon LOW against Fri CLOSE. Note: if Fri market is closed, i looked at Thu data. Same for Mon/Tue.
- in all of 2022 (jan 1, 2022 to Mar 10, 2022), the Fri close is ALWAYS lower than the Mon close... this gives me an important clue: the CC/BCS -c will be safe if strike is higher than the Mon/Tue close. (ie backtesting shows that opening a CC/BCS on Tue using Mon's close as -c strike is a 100% probability of success)
- NOT ADVICE
- NOT ADVICE
- NOT ADVICE
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Knightshade
Well-Known Member
For clarity, am I correctly reading your first 2 points are based on 1 full year of data while your 3rd point is only on just over 2 months of 2022 data?
STO - 07/15 -$750/+650 BPS for $38 each
Used proceeds to purchase more Calls - thanks for selling them to me!
07/15 $1000's for $40 each
Used proceeds to purchase more Calls - thanks for selling them to me!
07/15 $1000's for $40 each
john tanglewoo
2012 Roadster Owner
Just booked my first profit from my March 18 720 sold puts!!! Didn't love the idea of holding them over the weekend, and the premiums in April were looking pretty nice.
Closed out that trade and sold 4 more contracts April 14 660, about 21% out of money. Will watch these closely with the fed meeting next week and this crazy NATO news.
Closed out that trade and sold 4 more contracts April 14 660, about 21% out of money. Will watch these closely with the fed meeting next week and this crazy NATO news.
if one is trading Fri-Fri:Very nice. Can you check Friday to Friday?
- BPS: it looks like 20% OTM is not safe (march 11, 2021 to march 10, 2022). The lowest drop is -19.98%. This is derived from Prev Fri HIGH against Current Fri CLOSE. Note: if Fri market is closed, i looked at Thu data. Same for Mon/Tue.
- CC/BCS: it looks like 20% OTM is not safe (march 11, 2021 to march 10, 2022). The highest rise is 20.02%. This is derived from Prev Fri LOW against Current Fri CLOSE. Note: if Fri market is closed, i looked at Thu data. Same for Mon/Tue.
- perhaps 30% is the safest bet
- i will see if i can get maxpain raw data; it will be interesting to chart this
- NOT ADVICE
- NOT ADVICE
- NOT ADVICE
NATO getting dragged into the war is absolutely not priced in. That's a disastrous result that would crush equities, but luckily the US is very set against bilateral conflict with Russia and is avoiding it all costs (see: Biden personally vetoing Poland's offer of supplying MiG aircraft to Ukraine). I'm seeing more noise about Belarus potentially moving into Ukraine, which I think could heighten unease and send us lower, since their involvement would be just one more step on the descent into a full-scale regional conflict.
I've taken it on the chin with BPSs as well, still holding $1200 puts first sold back in November! I've been able to trade my way to paying for rolls (even making a little extra on top), but the position continues to be a thorn in my side.
So much turbulence...
Words of caution: next week is the most anticipated FOMC meeting in recent history of the stock market. I think it'll be wise to allow the stock A LOT of room to run on both sides. My bias is UP.
scubastevo80
Member
Rolled this garbage for fear of closing below $795 to 3/18 -755/+710 for a $3.05 credit... and also bought a few shares at $795.
I have 3 sets of BPS expiring in the next two weeks with upper strikes from $790 to $755 and I'm thinking about rolling them all to early April for max strike improvement. One big negative news article re: Russia and we could drop 10% in a day and I'm SOL.
@dl003 - I think the FOMC could impact the markets positively, but I still feel Russia firing a nuke, weaponizing Chernobyl, or something else radical wipes out option holders rather quickly. Zero chance that anything the Fed does or says lifts the markets more than a few %. Everything right now is centered around the Russia/Ukraine conflict and resulting fallout (oil and commodity prices, inflation, global logistic challenges, etc). If I was sitting on cash, I'd be happy, but alas I'm fully invested in all accounts. Selling at this point in time would be a terrible market timing decision (should have sold between Nov and year end).
So the E*TRADE Risk department stepped in and closed my 790/795 BPS position about a half hour before close, at about a 15% gain. 
Even though I was pretty sure we would close above $795 and I was willing to take the risk. (And had the cash/margin available to take the loss.) Though I would have still probably closed it early and not waited for it to get 100% because of the risk of AH execution.
I guess I got greedy and should have closed it out earlier in the week like I was thinking about, but I was comfortable with waiting to get more of the gains.
Even though I was pretty sure we would close above $795 and I was willing to take the risk. (And had the cash/margin available to take the loss.) Though I would have still probably closed it early and not waited for it to get 100% because of the risk of AH execution.I guess I got greedy and should have closed it out earlier in the week like I was thinking about, but I was comfortable with waiting to get more of the gains.
I'd like to present another view:
Next week is quad witch and max pain on SPY is 443. This means that the amount of puts ITM is much, much larger than the amount of calls ITM. If FOMC is dovish, put holders will trample on each other for the exit, which leads to a squeeze on the entire market. Then we'll see a retracement as call holders take their profit. The general direction afterward for the market will be up. TSLA can easily run 100 points if SPY goes up to 443.
If FOMC turns out to be hawkish, we'll see a bloodbath, followed by a dead cat bounce and the general direction afterward will be down, aka a prolonged bear market.
I've been tracking the performance of SPY during quad witch weeks. Without fails, it has always hit its max pain at some point during the week. What also important is whether the Friday marks a turning point for the market or serves as a continuation of the current trend. Since the end of the COVID crash, every quad witch Friday has been a day for traders to roll their existing positions to new positions, meaning the market dropped but then came roaring back the week after. There's only one exception and it was the January LEAP OpEx. The market dropped way past its max pain (SPY 460) and never was able to reclaim it. That was a sign of trend reversal. This coming quad witch day is super important. It scenario 1 plays out, I have no doubt SPY can overshoot 443 and signal a new bull run. If scenario 2 plays out, we go much deeper from here as the market will perceive hawkishness as a trigger for an economic recession.
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Do you have established criteria for hawkishness and dovishness (within this specific meeting)?
Personally for me:
Hawkish: 0.5% rate hike (this alone should crash the market); expressed concern for persistent hyperinflation; QT in the near future
Dovish: 0-25% rate hike; "we will monitor economic indicators and adjust our policies accordingly"; "inflation is exacerbated by supply chain disruptions and geopolitics"; no QT in the near future.
Given that JPow pretty much came out and said "we're doing .25" at the Congressional hearing, I think .5% would be shocking (both personally and for the market), and I don't think February's CPI reading changes that dynamic. Maybe if the PPI is just off-the-charts hot on Tuesday, but yeah - hard to see a .5% rate hike coming out of the meeting with the current data and geopolitical situation.
I'm less confident that we won't get some hawkish language elsewhere in the statement / press conference. I think the reality is we'll be somewhere in the middle between dovish and hawkish because, let's face it, that's just the situation we're in.
NATO being dragged into the war isn't one of the risk factors that I've thought about. I think because it is so tightly wrapped up with this going nuclear, a little or a lot. So I would say no, on its own, or that its one of the big risks to the downside that I see in the current situation that I don't see priced in.
I personally consider NATO being dragged in, absent a nuke provocation, to be sufficiently low that I don't have it on my list. I guess that means I think that something nuclear happening to be higher than NATO getting drug in.
EDIT to add: really really not-advice. This is how I see things - my record this year suggests strongly that I should not be listened to.
When do we get FOMC info / output? I know PPI is arriving Tuesday morning - CPI came in 0.1% above consensus. Considering how that number gets revised the next two months (and the degree to which the market does not care about those revisions) I consider that to be in-line with expectations.
I am expecting PPI to come in high, and I expect the market to expect the inflation numbers to be even higher next month. Considering the Fed's mandate, I consider a 0.5% rate increase to be reasonably likely. I realize it hasn't been guided that way already, but the Fed has strong employment already (mandate #1) - they need to get a handle on inflation (mandate #2) and the best tool I think they have available right now is something a little shocking (such as 1/2 pt raise instead of the 1/4th point we all expect). The other tool I can see - actively shrinking the balance sheet they have built the last 2 years is too drastic of a tool to employ right now.
Another Fed outcome that I can see - the 1/4th rate raise, but with language that sounds more like a 1/2pt raise. Neatly threading the needle between what the market expects, and putting us all on notice that the next round is going to be more aggressive, and this one really should have been as well.
I am not so naive to think that the stock and bond markets don't help wag the Fed dog, but the Fed mandate is clear and easy: full employment subject to the inflation constraint. In recent years that has come to mean 4% employment (maybe its 5%) and 2% inflation. As inflation has been running below 2% for awhile, a period of being over 2% isn't a problem. But if we're looking at 8-12% inflation for the rest of the year then that is a problem.
Another argument in favor of the 1/2 point rate increase is that creates even more breathing room and options to the downside. When the target rate is 0 there isn't room to go lower to stimulate employment / economy. So more than a few rate hikes is a good thing, even if its not viewed that way in the very short term.
My own plan of the moment - I opened some new 750 puts yesterday on the move down (810ish share price). I expect the share price to keep going down, but I don't know that it will, and since they are cash secured I can roll them along forever if needed. I don't see a big enough move below 750 that I can't roll for at least a small strike improvement. I also plan to continue selling cash secured puts right through these next few weeks.
My bias is also upwards over the next 4 weeks or so. Down at the front end of the week as PPI and interest rate increase happens, then a week or so of choppy, and then the share price starts going up in preparation for P/D, and afterwards in reaction to P/D. Maybe even earnings report this time as well. I expect P/D to, again, handily beat Wall Street estimates. It'll be another data point in the tally of the Tesla Story - one that if, repeated enough, will turn market perception of Tesla into a safe haven stock that is largely or completely immune to rate hikes and to inflation.
Thus my plan is to have all of the CC closed that I can by next Friday and to stay out of them through at least P/D. I've got some shares and purchased calls that I'm looking to sell in April and I'm looking for another P/D spike like we got 3 months ago.
Oh - I also expect the war in Ukraine to have some sort of desirable conclusion from Ukraine's point of view. It might be something as simple as Ukraine needing to mount a humanitarian mission to help the Russians get back home over the border
. I do expect that a conclusion that doesn't involve nukes to be a huge positive in the opinion of the market and I don't expect that resolution to need months and probably not weeks. Another reason for me to sit out CC at least through Tesla's reporting period.Worth noting - I do have 760 strike calls for next Friday expiration. I am hoping for a drop on Monday - I'll buy those out at a loss given a good opportunity (i.e. small loss) so all of those shares are uncovered and benefit fully from a big move up. I consider that likely enough in the next 4 weeks, that I am planning now to not sell CC for 2-5 weeks.
I just thought of a 3rd fed outcome this month. Due to all the chaos and economic difficulties in the world, the Fed decides to not raise the rates at this time to keep the economy ticking along (language to that effect). Maybe oddly - I would consider this outcome to be bad for the market, as too many market participants will view this as leaving out of control inflation, out of control.
But hey - its in the solution set! Bad for the market if it happens (MHO) and really, really unlikely (MHO).
My argument against a 0.5% rate hike is that the Fed DOESN'T KNOW that it'll work. When was the last time we had high inflation due to a global supply chain disruption and now a full-on war? While I think the Fed should use every tool they have to try and get it under control, they should be cautious because they might be playing with fire here. Says the global economy needs time to adjust to the abrupt shortage of Ukrainian and Russian exports, high interest rates might discourage companies from expanding production, for example. That's why I think the Fed should try take the first rate-hike out for a ride and see how the economy responds to it first. Already we are seeing used and new car prices falling with zero Fed intervention. Fueling will now take priority over some discretionary spending, which by itself should reduce prices in those categories. I think a cautious Fed will not be heavy-handed while observing the supply v. demand dynamics at play.
On the other thread, someone posted link to a Twitter feed where the guy translated a top-secret letter to Putin, in which an FSB official stated that China is not happy with the ongoing conflict in Ukraine. I hope this provides a tremendous amount of incentive for Putin to make concessions in negotiating.
On the other thread, someone posted link to a Twitter feed where the guy translated a top-secret letter to Putin, in which an FSB official stated that China is not happy with the ongoing conflict in Ukraine. I hope this provides a tremendous amount of incentive for Putin to make concessions in negotiating.
(part 3) i added today's 3/11 info and i also added Open vs Close stats...
i charted the 1-yr data since am a visual person, preferring lines instead of numbers so i can see trending and patterns
fun facts:
- if one is doing intraweek trading: for 2022, excluding the jan 7 black swan, it looks like 15% OTM is safe for BPS and 7% OTM is safe for CC/BCS. The BPS OTM% is trending higher (ie getting closer to ATM, more credits)
- if one is doing intraweek trading: for the 1-yr data, it looks like the yellow "Fri Close vs Mon Open" is a better indicator for both BPS and CC/BCS. For ex, on Jan 21 BPS, one can open 9% OTM instead of 14% OTM.
- if one is doing fri-to-fri trading: for the 1-yr data, there are less knives falling than intraweek trading. I interpret that to mean the Fri close is more predictable for BPS (ie less deviation from Prev Fri HIGH or OPEN).
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