Wiki Selling TSLA Options - Be the House

[dc_h]

Any general thoughts/non-advise about rolling DITM longer-term covered calls? I have 0520-C$980 and $1000, and 0819-C$1000 and $1100, and have been looking at 2-3 week rolls for about a week. Nothing jumps out at me other than the usual trend that rolls get less effective as the SP rises.

Today
- looking at pros and cons of rolling some of these into long-termers I might be able to forget about
- wouldn’t mind having some assign at $1100 asap
- getting twitchy not being able to generate income the last few weeks.

I have some long term 1000 CC's due in 2023 and 2024. If I roll the June 23 to Jan 24, I can make $60. If I do that again and roll to June 2024, I'm making $120. If I think of that as a return on my stock, which is 1080 now, it is a little over 10%. Not bad, but locking up the stock for another year. I'm near retirement, so the 2023 or 2024 time could line up with needing to divest some of my near singular investment program with Tesla. Once we're in the money, I think stretching out the date is like getting a dividend. I think you could still roll 5 contracts and use the proceeds to buy back one contract and start selling short term CC's again, which would be more profitable than the one roll for $60, or just have the freedom to sell.

 

[adiggs]

I have some long term 1000 CC's due in 2023 and 2024. If I roll the June 23 to Jan 24, I can make $60. If I do that again and roll to June 2024, I'm making $120. If I think of that as a return on my stock, which is 1080 now, it is a little over 10%. Not bad, but locking up the stock for another year. I'm near retirement, so the 2023 or 2024 time could line up with needing to divest some of my near singular investment program with Tesla. Once we're in the money, I think stretching out the date is like getting a dividend. I think you could still roll 5 contracts and use the proceeds to buy back one contract and start selling short term CC's again, which would be more profitable than the one roll for $60, or just have the freedom to sell.

My own not-advice - rolling 1000 strike cc due June '23 is premature UNLESS you feel that this is the best roll opportunity between now and then; that the shares are heading up from here and going to stay up.

The primary reason is that June '23 1000 strike cc's are going to have a LOT of time value, and you have to buy that out in order to sell even more time value further out.


If that's the belief - we're up, up, and away from here and you'd like to get as much from that position as possible, then I would bias towards max strike improvement. This gets more difficult to decide on - you might choose a lower strike in order to generate present cash flow. But if the cash flow isn't a thing and you want to maximize your result later on when they get assigned, then take all of the credit as strike improvement.

You'll find that even really DITM, somewhere around $3-$4 will buy you $5 worth of strike improvement. That $60 in credit might be worth more like $100 as a strike improvement.

Mostly though I would keep an eye on the time value and give it room to run. June '23 is a long time away.


And of course the more straightforward way to take advantage of up, up, and away is to eat the loss now so that the uncovered shares can make it back.

 

[OrthoSurg]

Is profit taking expected after P&D numbers or earnings? The SP is way too stable for what I got used to. I was expecting sky rocket to $1500 or a pullback profit taking to $900 but none of them happened, yet.

 

[Knightshade]

Is profit taking expected after P&D numbers or earnings? The SP is way too stable for what I got used to. I was expecting sky rocket to $1500 or a pullback profit taking to $900 but none of them happened, yet.

I was about to start a post about "well, traditionally between P&D and ER...." but we saw how that went last quarter.

 

[elasalle]

Everyone is cutting their delivery estimates because of China COVID lockdown ... so better chance the estimate gets beaten
IIRC, only 17 ships this quarter vs 21 last quarter ... (supposed to have more cars per ship)
Closed 1200 CC 2 days back at 50%+ profit, thinking we might be hitting it by EOD today

If SP goes up, next few weeks till earnings is gonna be best time to sell all them long term CC's again.

 

[adiggs]

NOT-ADVICE
In anticipation of a big P/D report and Monday (up) reaction I've gone long with some 1250 strike calls for next week ($3). Its a small position in $ terms - the intent is that I'll close on Monday pretty much immediately, regardless of what happens.

The idea is that having sold a lot of delta yesterday just in front of production report, I'm opening a very short term and small position designed to take advantage of the primary event I think I'd have been missing out on - the immediate production report.


I rarely or never purchase speculative calls because they almost never work for me. Following me into something like this is probably a bad idea

 

[MP3Mike]

In anticipation of a big P/D report and Monday (up) reaction I've gone long with some 1250 strike calls for next week ($3). Its a small position in $ terms - the intent is that I'll close on Monday pretty much immediately, regardless of what happens.

I did exactly the same thing, at the same strike and price...

As far as my CCs, I rolled some, and I was about to swap half of them to a BPS this morning during the dip, but I couldn't decide in time and the dip passed. So now we we wait and see what the P&D looks like.

 

[Max Plaid]

BTC 4x -c1100 in the MMD for 90%
Less lucky with 4x -p1100, pesky SP stubbornly keeping below 1085 most of the day (I missed the 1090's pop as I was busy), so had to take a 45% hit on those
STO 4x -p1100/-c1100 straddle for Monday, which gave a very pleasant $76 combined premium.- playing the IV there, but with modest position so as not to get into trouble in case of a big move

Also have 5x 2800 GOOGLE straddle for next week - $85 per position, missed out closing out the call side for 60% into close - work, family and pets, eh...

 

[MP3Mike]

What ratio do you think Tesla is going to split?

Run a report on your trades for the last year and total up your option fees, then multiple it by the split ratio. It seems that the split is going to make it much harder to make money. I can't even imagine if they do a 20:1 like Amazon and Google are doing...

 

[Knightshade]

Wasn't there a broker mentioned a while back that had a cap on fees where folks doing like hundreds of contracts got a lot better deal?

 

[stealthyc]

Wasn't there a broker mentioned a while back that had a cap on fees where folks doing like hundreds of contracts got a lot better deal?

Tastytrade

 

[Knightshade]

Tastytrade

Yup, that was it!

Options, Futures, Cryptos Fees & Commissions

Low commissions on options, futures, cryptos and stocks. From just $1.00/contract. Brokerage fee comparison. Free to close your position. No ticket charge.

tastyworks.com

$1 per contract to open, $10 capped max per leg, and $0 to close. (10 cent clearing fees still apply per contract leg open OR close and don't appear to be capped)

 

[MP3Mike]

$1 per contract to open, $10 capped max per leg, and $0 to close. (10 cent clearing fees still apply per contract leg open OR close and don't appear to be capped)

Which makes their comparison chart a little misleading since at least E*TRADE includes the clearing fee in their per contract price.

 

[Knightshade]

Which makes their comparison chart a little misleading since at least E*TRADE includes the clearing fee in their per contract price.

Sure, but I think there'd be virtually no case where Tastyworks wasn't cheaper once you're beyond 25 or so contract legs open and close at a time.

It'd probably close enough that folks doing 25-50 at a time can't be bothered moving today.... but if thanks to a big enough split those folks are suddenly doing 250-500 a week at 10:1. or 500-1000 a week at 20:1, that's gonna add up to a pretty large difference.

 

[WattsHappening]

Sure, but I think there'd be virtually no case where Tastyworks wasn't cheaper once you're beyond 25 or so contract legs open and close at a time.

It'd probably close enough that folks doing 25-50 at a time can't be bothered moving today.... but if thanks to a big enough split those folks are suddenly doing 250-500 a week at 10:1. or 500-1000 a week at 20:1, that's gonna add up to a pretty large difference.

One other consideration is execution. Schwab consistently gives me good execution when entering market orders. For example, when buying/selling an option at market, I invariably get a price somewhere between the bid and ask.

I'm not suggesting Tastyworks doesn't do the same; I don't know anything about them. But especially for options, quality of execution should be factored.

 

[Knightshade]

One other consideration is execution. Schwab consistently gives me good execution when entering market orders. For example, when buying/selling an option at market, I invariably get a price somewhere between the bid and ask.

I'm not suggesting Tastyworks doesn't do the same; I don't know anything about them. But especially for options, quality of execution should be factored.

FWIW Tastyworks was the only broker to rank better than Schwab on execution from what I found-

Tastyworks Headlines These Best Online Brokers For Order Execution

Free trades aren't really free. The best online brokers for order execution in 2021 save clients money by getting better prices than others.

www.investors.com

Fidelity (where I am) was next after Schwab... then IBKR and TD Ameritrade in 4th and 5th.


I poked around a tiny bit more, and mainly found folks with Strong Opinions on brokers who use PFOF and those who don't... but both Schwab and Tastyworks (and TD) all use it... (Fidelity does not- IBKR does but only for non-pro clients)

 

[BornToFly]

Some people here have had their margin requirements change at the worst possible time with some of the other brokerages. At least with Fidelity that did not happen to me this year. Would have been devastating....

 

[adiggs]

I did exactly the same thing, at the same strike and price...

As far as my CCs, I rolled some, and I was about to swap half of them to a BPS this morning during the dip, but I couldn't decide in time and the dip passed. So now we we wait and see what the P&D looks like.

Great minds, eh?

What ratio do you think Tesla is going to split?

Run a report on your trades for the last year and total up your option fees, then multiple it by the split ratio. It seems that the split is going to make it much harder to make money. I can't even imagine if they do a 20:1 like Amazon and Google are doing...

That's what I've been thinking about. I don't do 1 contract positions - going to be a lot more commissions / fees going out.

Sure, but I think there'd be virtually no case where Tastyworks wasn't cheaper once you're beyond 25 or so contract legs open and close at a time.

It'd probably close enough that folks doing 25-50 at a time can't be bothered moving today.... but if thanks to a big enough split those folks are suddenly doing 250-500 a week at 10:1. or 500-1000 a week at 20:1, that's gonna add up to a pretty large difference.

Tastytrade is cheaper on the 1st contract (vs Fidelity) for any case except where you STO a contract, and then BTC at <0.65. Admittedly with a big split we'll be handling a lot more <$1.00 options, so closing at <$0.65 will be a lot more common.

Worth noting - a vertical spread (such a put credit spread) is a 2 legged spread. So that's $10 each for 45 contracts (anything > 10), not $10 for the total position.

Math: TT = $1 in, $0 out.
Fidelity - $0.65 in, $0.65 out, for a total of 1.30.


Then TastyTrade really takes off past 10 contracts. On a 5:1 split (duplicating the previous action), there won't be many trades that I do for <10 contracts.

 

[MikeC]

What ratio do you think Tesla is going to split?

Run a report on your trades for the last year and total up your option fees, then multiple it by the split ratio. It seems that the split is going to make it much harder to make money. I can't even imagine if they do a 20:1 like Amazon and Google are doing...

After the last split, I don’t think it ended up that you needed 5x more contracts to make the same amount of premium as pre-split. My impression was that I could open a lot more contracts but still get roughly the same premium for each contract as before.

 

[BornToFly]

After the last split, I don’t think it ended up that you needed 5x more contracts to make the same amount of premium as pre-split. My impression was that I could open a lot more contracts but still get roughly the same premium for each contract as before.

Exactly. My income increased almost 5X after the first split. I would love a 20:1. Even if I make 90% less per contract, that is 2X the income!