Wiki Selling TSLA Options - Be the House

[BornToFly]

@BornToFly any stories you'd be willing to share about your losses? looking for camaraderie maybe ...were you long on calls? i held march calls in large quantity as they dwindled down from ATH to elon's "should i sell" tweet and the spiral downward.

I've been investing in TSLA since 2013. Normal pattern is for the SP to climb on the "rumor" going into earnings, with possibly a sell off after. I expected the entire month of January going into earnings to be strong. Also the NASDAQ has climbed during the month of January the previous 5 years. So I used most of my margin on a lot of BPS spreads just under 10% below the SP in early January. As the SP started to decline I thought I was a genius when I rolled out for more credit and kept the same strikes. But the SP kept dropping, and so I got to the point that the SP was getting to the midpoint of my spreads. After earnings the SP dropped even more despite the massive beat everyone here knew was coming. I ended up having to widen, reduce the number of spreads, and roll to December. I lost around $6 million buying back some spreads at a loss and was still on the hook for my December spreads with $12 million in required margin. I nearly had to sell a lot of shares as we got to 700 because I was going to get a margin call. I also had smaller plays that lost me some money, but nothing to that magnitude. I don't typically buy calls, although I would have a few weeks ago if I wasn't on the verge of a margin call. Basically now I'm only able to do enough trades to make a little living expense money because my margin is used up until my BPSs expire in December (1150/850s and 1100/800s). If I had just been more conservative I could have easily made $5-10 Million this year. The problem is that to get some cash I sold CC for December 1200 on 1/3 of my shares, and Jan 2024 2,000 strike for the rest. I will roll the Jan 2024 in the next year or so to a higher strike. The December 1200 will depend on what the SP is doing. I either let the shares get called away so I can hopefully make more money with cash secured aggressive Puts/Calls, or I will roll them up and out. Ideally I sell all my shares at 3,000/share with plenty of money to buy what ever I want, give to charity, and help family here and in Europe.

 

[adiggs]

@adiggs thanks for your additional info on my deep ITM cc issue. to answer your question from a few pages ago, i don't have any schedule for the position and plan to roll forever. if it's 2 years, it's 2 years... 3 years... ugh. Took your advice and rolled 1 year rather than 2 for a big strike improvement... did not feel as good, but i suppose a lot can happen in 1 year's time.

i am wondering if i should buy a few back now and re-sell after we hit $1200 as you mentioned. i feel like we'll get there soon....

I get lots of ideas from others here in the thread, and like to pass along ideas as well.

Whatever you're looking at, remember that you're always making a tradeoff. There are risks and rewards. If you can't identify that tradeoff, or the risks and rewards, then you need to keep looking or make like @Yoona and ask questions ("what am I missing?"). Because they are ALWAYS there. If they weren't then you'd have a free lunch aka free money, and you can be certain as the sun rising that there is somebody else that is more capitalized and has better technology and reaction times that will buy up all of that free money.


Whether to buy a few back now or not - that's probably too detailed of an analysis to do here. But I do have another idea or three to consider.
- improve a single contract, or some subset, so that it eventually resolves. Example - instead of rolling 10x900 cc with effectively no strike improvement, roll 5 for no strike improvement, and use all of those credits to roll the other 5 for 1 strike improvement. Or roll 9 for no strike improvement and use the combined credit to roll 1 for a more significant strike improvement.

- Track the overall net credit for each position (I use Wingman to do my trade tracking rather than a spreadsheet) and be reluctant but willing to use some of that previous credit to improve the current bad position.

- Use credits from other positions to improve the bad position.

- Flip roll. Roll from a call into a put, or a put into a call. This requires that you have the other backing available for the new position. As above you don't have to do this with all of them either.

- Split roll. Also depends on having adequate backing available - roll 1x<troubled option> into 2x, 4x, or whatever. This is a variation on using the credits from a second position to buy an improvement on a bad position.

-- More generally all of these are variations on a theme. You've got a bad position. To get out of it, realize the loss on the bad position while opening a new (and hopefully somewhat less bad) position for a credit (more cash in than out), and wait. As long as you like the new position better than the old, and as long as you don't have a schedule that will end the rolls, then maybe that really big position you would never start with will offset the big loss with a bigger gain.

- Take assignment! Yes, this really is an available choice

- And yes - consider paying the piper and buy out the loss. This is easier when you can point at other gains that leaves the overall result highly positive.

- Another generalization that is another way of saying the same thing. Be reluctant but ready to use previous profits to pay for current losses. Some previous good position - turns out it wasn't quite so good as some of it is now being used to buy back a current loss (strike improvement).

To do this - you need to know the current cash flow and realized result for each position that is rolling. I track my income results at a monthly level, so that's the detail level where I do this analysis. I use Wingman to track my trades in - many use spreadsheets or other tools. The only theme - use something to track your results so you're not guessing. Its easy to guess your way into a loss, thinking that you're gaining.

 

[OrthoSurg]

not reacted early enough, wanted to sit it out instead of taking 6-figure losses until it was too late & no rolls available..

Also i had a sizeable position in ARK-stuff that also halved taking out even more buying-power..

on the high in january (~1200) i thought: "no way we will see 1000 again" and sold 1000/900 BPS for end of jan .. that did not go well..
rescue-rolling to feb & the further dump did the rest...

Currently rebuilding everything :/

I posted at the worst times here if someone needed some programming done for trading .. But noone took up the offer :/

Probably what would have happened to me too if I had went into BPS. Stayed with naked puts and got so many contracts underwater that I couldn’t close any of them. Had to close many on margin call during the start of the war at the lowest possible because I had -1% margin left the previous closing day. My bank denied my roll 1 year out to salvage all my positions and at the worst my portfolio collapsed 60%. Also gradually building it back with long plays instead of short term. Good luck recovering.

Went from controlling the equivalent of 6500 shares to 2400 shares. Still have my core position however I liquidated all my NIO, ARKK, Bitcoin, Ethereum, MSFT, etc holding to keep my core TSLA shares.

Now I open one contract at a time. Even if I think the stock is going to go up, I expect a 50% drop the day after I open a position. That is my new premise.

 

[WattsHappening]

Thanks to all of you for your war stories; I appreciate you sharing. Real good lessons to be learned.

As @UltradoomY mentioned, we are becoming battle tested.

I'm still learning on the fly. Have a couple of BPSs from Jan that went underwater. As they were pretty close to max loss and I wasn't planning on using the underlying cash, I ended up rolling these far-and-out enough to at least not have to worry about it for a while. If the SP rises in the next year+, I should be ok on these.

I'm also sitting on several 4/1 $860cc. I've contemplated letting these get exercised on Friday, just eat the loss and then either purchase shares back or sell CSPs. But I'm starting to lean in favor of rolling these out by a couple of months. I can roll these to 6/17 880cc for about a $15 credit. Or I can roll to 6/17 900cc for a flat trade. Unfortunately, the theta is so low on these I am not able to roll out by one week without a debit once I factor in bid/ask spreads. My thinking is:

• I would prefer to not lock in losses if I can help it.
• Getting a $15 credit for a $20 improvement in strike price is appealing.
• Even if SP continues to rise, any continuing loss on this trade is more than offset by increase in total portfolio value.
• Even though I don't expect the SP to drop, we all know the market is irrational and experiences irrational tantrums. Wait it out for the inevitable drop and then hope to get out with much lower losses.

One thing that is a bit unnerving to me is how quickly and easily I can change my mind and convince myself of a trade. Who knows, I may wake up tomorrow morning and decide to let the CCs get exercised and then bet 100% of the proceeds on April 8 moonshot call options!

 

[OrthoSurg]

. Who knows, I may wake up tomorrow morning and decide to let the CCs get exercised and then bet 100% of the proceeds on April 8 moonshot call options!

That is EXACTLY how the market is behaving. I tried to be rational, expect certain probabilities of SP movement with the knowledge I had just to realize the market participants are just a herd following trends on technical analysis completely disconnected from companies fundamentals in the short term. That’s why all my bets are now long term bets betting on high probabilities of stock increasing over time because in the short term I am as good as a blind man skiing.

 

[CHGolferJim]

I’ve decided that while I have a good feel for the progress of the company in multiple business units, and a conviction that the fundamentals are in place for enormous growth in sales and profits and SP, I have no idea when the market will go hot or cold for weeks or months and swing SP away from fundamentals. Isn’t that the case for virtually every growth company, and especially TSLA given the enormous level of option trading, which may only increase after the split? In the past 6 months, we’ve seen enormous successes and enormous failures in various options gambits by many here, including myself. I conclude many people are taking way too much UNKNOWN risk in these short-term trades, and despite the many catalysts on the horizon (i.e., “fundamentals”), there is no reason to think SP will rise on a steady and consistent glide path through 2022 and beyond. I think it will continue to be a bumpy ride, so aggressive moves on puts, calls and spreads is playing with fire. Some of the cleverest people have admitted losing millions. While I’m currently holding some >$100 ITM CC and many underwater LEAPs, rolling and holding, respectively, should eventually work out. I’m glad I haven’t sold calls against 55% of core shares (learned the hard way in 4Q).

 

[Zhelko Dimic]

not reacted early enough, wanted to sit it out instead of taking 6-figure losses until it was too late & no rolls available..

Also i had a sizeable position in ARK-stuff that also halved taking out even more buying-power..

on the high in january (~1200) i thought: "no way we will see 1000 again" and sold 1000/900 BPS for end of jan .. that did not go well..
rescue-rolling to feb & the further dump did the rest...

Currently rebuilding everything :/

I posted at the worst times here if someone needed some programming done for trading .. But noone took up the offer :/

I did 92.5% drop down by Feb '16 on TSLA
I took lessons to heart, rebuilt and borrowed to invest at opportune time.
3.5 years later and first TSLA moves from $2xx to $4xx pre-split (i.e. $40-$80 today) and I was in a position that work became optional by the end of '19.
Which was a good thing as I lost my VP Eng. job.
Which was a bad thing because then I converted 80% of my Tesla at today's $80-$180 to dividend paying investments.

Anyhow, not sure what's the point, other than that 90%+ drop isn't the end of the world.

 

[adiggs]

I'm also sitting on several 4/1 $860cc. I've contemplated letting these get exercised on Friday, just eat the loss and then either purchase shares back or sell CSPs. But I'm starting to lean in favor of rolling these out by a couple of months. I can roll these to 6/17 880cc for about a $15 credit. Or I can roll to 6/17 900cc for a flat trade. Unfortunately, the theta is so low on these I am not able to roll out by one week without a debit once I factor in bid/ask spreads. My thinking is:

• I would prefer to not lock in losses if I can help it.
• Getting a $15 credit for a $20 improvement in strike price is appealing.
• Even if SP continues to rise, any continuing loss on this trade is more than offset by increase in total portfolio value.
• Even though I don't expect the SP to drop, we all know the market is irrational and experiences irrational tantrums. Wait it out for the inevitable drop and then hope to get out with much lower losses.

Considering how deeply ITM the position is right now, my not-advice is to only go for the $20 strike improvement with $15 credit if you think there's a reasonably good chance the share price is coming most or all the way back during the expiration period. That $15 credit can probably buy you another $15 strike improvement and leave $3 left over as a net credit (pay $12 to get $15 strike improvement - pretty typical when DITM).

But my not-advice is also based on the idea that the position will be that much better for assignment or early sale at the higher strike. It will be in fact, but you only realize the extra value through assignment. If not assigned and it goes OTM, you'll have spent that extra strike improvement on (effectively) lowering the risk. You've also extended the window with no cash flow / income, but a possible bigger unrealized gain at the end.

Hope that makes sense.


Alternatively (different way of saying the same thing) - my own approach is that if I'm rolling more than say 2 weeks, then I'm rolling for every scrap of strike improvement I can get subject to a net credit. The reason I'm rolling > 2 weeks is that I can't roll for a strike improvement with less, and that means I'm pretty deeply ITM. I've also decided I don't want to take assignment, so my new mental model is do I take assignment at the current strike, or can I roll into a better position that i would rather take assignment in. Mentally - I'm taking assignment either way, the only question is whether I take assignment in the current position or in the rolled position.

And if the shares turn around and the DITM goes OTM, then that just means I took a few weeks (or months) off from earning income. That is almost always a great outcome (no gain, no loss).

 

[Chenkers]

Another approach to consider for those dealing with ITM CC's is to use accumulated trading profits to gradually buy Calls a bit under the CC to turn them into a Bull Call Spread.

For example I currently have 8 x JAN'23 900CC. These used to be 19x that resulted from a margin liquidation of 750/900 BullCS. These originally cost $165 when creating the BullCS's but go up dramatically with the share price after they go ITM (currently $340). I've bought back several over time when I can. However my current approach is to purchase 850 Calls whenever I have sufficient cash and margin available from trading profits. This turns the ITM CC into a 850/900 Bull CS that stems further losses from the ITM CC as the share price goes up and allows me to sell additional weekly CC's. An 850 Call is currently around $369, making the BullCS value ($369-$340) $29 each. Assuming the share price is above $900 in JAN'23 this BullCS will be worth $50, giving a 72% return and stemming further losses from the ITM CC. I've turned 2 of the 900CC into BullCS recently and will convert the remaining 6 over the next couple of months.

 

[WattsHappening]

Considering how deeply ITM the position is right now, my not-advice is to only go for the $20 strike improvement with $15 credit if you think there's a reasonably good chance the share price is coming most or all the way back during the expiration period. That $15 credit can probably buy you another $15 strike improvement and leave $3 left over as a net credit (pay $12 to get $15 strike improvement - pretty typical when DITM).

But my not-advice is also based on the idea that the position will be that much better for assignment or early sale at the higher strike. It will be in fact, but you only realize the extra value through assignment. If not assigned and it goes OTM, you'll have spent that extra strike improvement on (effectively) lowering the risk. You've also extended the window with no cash flow / income, but a possible bigger unrealized gain at the end.

Hope that makes sense.


Alternatively (different way of saying the same thing) - my own approach is that if I'm rolling more than say 2 weeks, then I'm rolling for every scrap of strike improvement I can get subject to a net credit. The reason I'm rolling > 2 weeks is that I can't roll for a strike improvement with less, and that means I'm pretty deeply ITM. I've also decided I don't want to take assignment, so my new mental model is do I take assignment at the current strike, or can I roll into a better position that i would rather take assignment in. Mentally - I'm taking assignment either way, the only question is whether I take assignment in the current position or in the rolled position.

And if the shares turn around and the DITM goes OTM, then that just means I took a few weeks (or months) off from earning income. That is almost always a great outcome (no gain, no loss).

Thanks @adiggs! It makes perfect sense. And as I think it through, this makes much more sense for my position. My goal is to get back to breakeven, or if that's not possible, to minimize losses. To that end, rolling to 900cc makes much more sense. Plus there is the added benefit that the $900 call has much greater trading volume than the $880 call, which will help with the bid/ask spread.

Another approach to consider for those dealing with ITM CC's is to use accumulated trading profits to gradually buy Calls a bit under the CC to turn them into a Bull Call Spread.

For example I currently have 8 x JAN'23 900CC. These used to be 19x that resulted from a margin liquidation of 750/900 BullCS. These originally cost $165 when creating the BullCS's but go up dramatically with the share price after they go ITM (currently $340). I've bought back several over time when I can. However my current approach is to purchase 850 Calls whenever I have sufficient cash and margin available from trading profits. This turns the ITM CC into a 850/900 Bull CS that stems further losses from the ITM CC as the share price goes up and allows me to sell additional weekly CC's. An 850 Call is currently around $369, making the BullCS value ($369-$340) $29 each. Assuming the share price is above $900 in JAN'23 this BullCS will be worth $50, giving a 72% return and stemming further losses from the ITM CC. I've turned 2 of the 900CC into BullCS recently and will convert the remaining 6 over the next couple of months.

Very helpful; thanks @Chenkers! I need to think this one through and will look into it tomorrow. I don't have a lot of cash in the account to go long calls in order to create a BullCS (I used the proceeds from the CCs to purchase shares). I could roll my CCs further out in time which would generate some cash. But I would think it's going to take a fair amount of cash to execute on this strategy. But something to think about. I really like the idea of 'stemming further losses' which is what concerns me most about being short my CCs.

 

[Max Plaid]

Thanks to all of you for your war stories; I appreciate you sharing. Real good lessons to be learned.

As @UltradoomY mentioned, we are becoming battle tested.

I'm still learning on the fly. Have a couple of BPSs from Jan that went underwater. As they were pretty close to max loss and I wasn't planning on using the underlying cash, I ended up rolling these far-and-out enough to at least not have to worry about it for a while. If the SP rises in the next year+, I should be ok on these.

I'm also sitting on several 4/1 $860cc. I've contemplated letting these get exercised on Friday, just eat the loss and then either purchase shares back or sell CSPs. But I'm starting to lean in favor of rolling these out by a couple of months. I can roll these to 6/17 880cc for about a $15 credit. Or I can roll to 6/17 900cc for a flat trade. Unfortunately, the theta is so low on these I am not able to roll out by one week without a debit once I factor in bid/ask spreads. My thinking is:

• I would prefer to not lock in losses if I can help it.
• Getting a $15 credit for a $20 improvement in strike price is appealing.
• Even if SP continues to rise, any continuing loss on this trade is more than offset by increase in total portfolio value.
• Even though I don't expect the SP to drop, we all know the market is irrational and experiences irrational tantrums. Wait it out for the inevitable drop and then hope to get out with much lower losses.

One thing that is a bit unnerving to me is how quickly and easily I can change my mind and convince myself of a trade. Who knows, I may wake up tomorrow morning and decide to let the CCs get exercised and then bet 100% of the proceeds on April 8 moonshot call options!

I gave in and ate the full losses on 15x -c900's, no impact on portfolio value, of course, but some numbers transfer from the cash to the positions column (quite large numbers, unfortunately), and that's been the story of this year, massive reversals when least expected, with no logic behind them, always resulting in underwater positions that eventually I give up on

My rationale now is that although this might be a bear-market rally we're seeing, the split announcement, on top of the recent run, with a decent P&D looming (I expect a mild improvement on Q4, but as Q1 is traditionally poor, this will be very bullish still and 70-75% YoY growth), GF4 now open, GF5 opening next week, earnings likely to be a substantial beat, etc., I think it's a lost cause to try and recover those positions and a strong risk that they go even deeper ITM... yes, the underlying LEAPS go up more in value as they have a higher Delta, but you're essentially capping you portfolio value

So I closed them out and change strategy, looking for small strangles going forwards. I already had sold 7x -p1050 for this week and looking at the premiums and capping at 1100, decided 4x -c1100's was a god risk -> idea is that I'm not committing all my LEAPS, so still have the capacity to write future weeks at higher strikes, recovering 4x ITM calls isn't such a big deal and the other 11x unused LEAPS would go up more in value, so psychologically would feel better. Likewise with puts, not committing too much, can roll a handful for a long, long time

I'm hoping this week's positions all expire, then I'm eyeing a couple of 1100 straddles for next week, two, maybe three as they're paying around $85 right now, so would need a move below 1000 or above 1200 to get in trouble with those...

And don't forget, folks, we often see an IV crush after P&D...

 

[vikings123]

So I’m on vacation and have not read all the posts but nobody worried about P&D numbers next week? Seems like there is so much bullishness in this thread. P&D numbers irrelevant for the long term but for the short term I can see a sell the P&D setting up.

I think estimates range from 300-318K with street average around 312K. I think the narrative of “no QoQ growth” can pick up some steam if the numbers are “low”. Or do we think the stock split news is big enough that any dips will be bought?

 

[samppa]

@adiggs thanks for your additional info on my deep ITM cc issue. to answer your question from a few pages ago, i don't have any schedule for the position and plan to roll forever. if it's 2 years, it's 2 years... 3 years... ugh. Took your advice and rolled 1 year rather than 2 for a big strike improvement... did not feel as good, but i suppose a lot can happen in 1 year's time.

i am wondering if i should buy a few back now and re-sell after we hit $1200 as you mentioned. i feel like we'll get there soon....

I have december 1100 ccs, that are covered by shares bought around 2017. I plan to roll these until 2027, then I will take assignment and sell those shares. Perhaps
In my country, I get a huge tax relief if I have held shares for over 10 years. Tax on capital gains goes from 32% to about 15% after 10 years.

 

[MikeC]

@Chenkers I don't have a lot of cash in the account to go long calls in order to create a BullCS (I used the proceeds from the CCs to purchase shares). I could roll my CCs further out in time which would generate some cash. But I would think it's going to take a fair amount of cash to execute on this strategy. But something to think about. I really like the idea of 'stemming further losses' which is what concerns me most about being short my CCs.

You could sell some shares to buy calls to turn the CCs into spreads. For example, use 100 shares to buy multiple DITM calls which take care of multiple CCs by turning them into spreads, instead of just one CC for the 100 shares.

 

[mongo]

So I’m on vacation and have not read all the posts but nobody worried about P&D numbers next week? Seems like there is so much bullishness in this thread. P&D numbers irrelevant for the long term but for the short term I can see a sell the P&D setting up.

I think estimates range from 300-318K with street average around 312K. I think the narrative of “no QoQ growth” can pick up some steam if the numbers are “low”. Or do we think the stock split news is big enough that any dips will be bought?

Nah, there are headwinds in Shanghai (New Years, C-19), but trend is our friend:
Production:
Q2: 206k
Q3: 238k +15%
Q4: 306k +28%
If Q4 was linearly increasing, then it exited at around a 350k run rate (and had US holidays)
Will be nice if they call out Berlin numbers also.

 

[bonk3125]

Thanks @adiggs! It makes perfect sense. And as I think it through, this makes much more sense for my position. My goal is to get back to breakeven, or if that's not possible, to minimize losses. To that end, rolling to 900cc makes much more sense. Plus there is the added benefit that the $900 call has much greater trading volume than the $880 call, which will help with the bid/ask spread.


Very helpful; thanks @Chenkers! I need to think this one through and will look into it tomorrow. I don't have a lot of cash in the account to go long calls in order to create a BullCS (I used the proceeds from the CCs to purchase shares). I could roll my CCs further out in time which would generate some cash. But I would think it's going to take a fair amount of cash to execute on this strategy. But something to think about. I really like the idea of 'stemming further losses' which is what concerns me most about being short my CCs.

My strategy for getting out of DITM cc was to “split-roll”. I rolled all but one cc to same expiration one week out to get (small) credit. I used that credit to offset the debit to roll that one cc for higher strike improvement than if I had done them all at once. I also had some remaining ammo with shares and leaps that I continued to sell way OTM weekly cc, using that credit to also offset that one cc. I started during the hertz spike and was able to close out all my ITM cc once the Elon selling dip was over.

Keeping track of your credit/debit with each roll is key, to make sure all your rolls by the end net you even. With each cc you free up, that’s another cc you can write for credit to work on the remaining cc for strike improvement. A compounding shovel or some such.

Hope that’s helpful. Feels painful while you see opportunity cost of the cc you could be writing right now as we climb, but hey, that’s the risk we take with our option plays (as I sit on my hands waiting for my ITM BPS to expire over the next few months hopefully).

 

[elasalle]

sold 1375 CC ~ .80+ cents. Delta .02 ..... some more pennies for this week

2 more votes/shares

Time for some mid-week walkdowns(roll -- Close 1375s, open 1250...) for the same expirations (4/1)
With 1100 barrier, 1250+ for another 40-50 pennies looks good ... need to buy a few more votes

 

[binlcd]

As a complete aside; discovering this thread has been the single best thing to happen to me this month. I've been really mentally out of it being stuck in these CC, conflicting feelings of happiness to see tsla surge, while being incredibly sad about it too. Wondering if this is how bitter TSLAQ people are made! Just haven't been myself. This community has been so incredibly knowledgeable & helpful... and hearing other stories has been so therapeutic.

 

[BornToFly]

Just watching the SP for the first hour. If we get a nice dip near the end of the first hour I will sell a few more 880/730 BPS. If we start going green, I will watch longer and instead sell BCS 1300/1450.

 

[Yoona]

Time for some mid-week walkdowns(roll -- Close 1375s, open 1250...) for the same expirations (4/1)
With 1100 barrier, 1250+ for another 40-50 pennies looks good ... need to buy a few more votes

my IC is also at 1250, closing it tom... no positions open this weekend (better safe than sorry)