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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
BrownOuttaSpec
Active Member
I am in a similar situation: Rolled my deep ITM Jan BPS out to Nov '22 850/1050
. I wanted to keep them in the same year for tax purposes though. I've been playing around with moving them in to a sooner expiration but nothing meaningful has caught my eye so I'm just watching the theta decay on them for now.Also, I just looked at making them an IC with a Nov '22 2200/2000 (No additional margin needed) and I didn't think the risk was worth it (approx $10 credit) since I am a super bull and really feel like anything can happen this year with all the catalyst and record numbers that continue to impress.
Amazing that $300 million of market cap can move around in and out of TSLA so quickly. It's going to be interesting to see how we are 3 weeks from now.
Knightshade
Well-Known Member
Only did about half the amount I could have done for that reason in fact. That the shares themselves are marginable made this more profitable than super-wide BPSes at the moment.
Over in another account though where I had the -1000/+875 4/14s I mentioned as the result of a couple months of rolls to avoid max loss I ended up rolling those to -1000/+750, so twice as wide only half as many spreads, for 4/22 for a net $6.35 a share credit inspired by the mention of 4/22 -1000 based BPSes earlier.
corduroy
Active Member
STO some 4/8 CSPs $1,000 @$3
My guess on the particularly distant BPS that are now OTM is that rolling in to get something cleared out is premature. The fundamental problem is that you'll have a lot of time value in those BPS (good to figure out how much probably), where step 1 is to buy out that time value (step 2 is to sell a new position with an even larger value).
One idea that occurs to me - instead of dealing with the whole position as a block, take care of it 1 BPS at a time. You'll probably need to feed extra resources in at the start, that you get back when that 1 resolves (which means you're adding additional resources to the position that can be lost).
So maybe 1 distant BPS can be turned into 5 near BPS at a position that is likely to expire worthless (or closed early for high % gain). You toss some extra cash onto the table, but in a position you think likely to be a winner. Now you have 1 less of those distant BPS. Repeat. To do this of course you'll need enough to back the additional 4 BPS.
The nature of the beast is that you'll be buying out the loss, but doing so in bits and on favorable terms. At the very least you'll buy out the loss at the expense of income for some period (the income is being used to buy out the loss, and the position that has resources locked up for an extended period).
One idea that occurs to me - instead of dealing with the whole position as a block, take care of it 1 BPS at a time. You'll probably need to feed extra resources in at the start, that you get back when that 1 resolves (which means you're adding additional resources to the position that can be lost).
So maybe 1 distant BPS can be turned into 5 near BPS at a position that is likely to expire worthless (or closed early for high % gain). You toss some extra cash onto the table, but in a position you think likely to be a winner. Now you have 1 less of those distant BPS. Repeat. To do this of course you'll need enough to back the additional 4 BPS.
The nature of the beast is that you'll be buying out the loss, but doing so in bits and on favorable terms. At the very least you'll buy out the loss at the expense of income for some period (the income is being used to buy out the loss, and the position that has resources locked up for an extended period).
Gotta love a down day like this. Those ITM calls sold yesterday are now ATM today. If this holds to end of week then I'll keep my shares and a $48 credit. As long as the share price continues at these very high levels (say 1050+) then I expect I'll continue to sell these really aggressive calls, at least with the subset of shares that I want to sell anyway. I'm keeping these open - they are ahead $23 right now but still have $25 left to earn. And hey these are shares that I mentally sold yesterday; maybe I'll get another chance to sell them next week!
The big down day sounds like a good excuse to sell some puts. Ordinarily I would, but today I think I'm going to wait and see what tomorrow brings. I also think I'm using last quarter's behavior too much - I just remember the day after, the day after P/D, as the start of a series of down days. Something better than opening puts after a $45 down day, is opening them after another $30 down.
I did close the 1240 calls opened yesterday. Those were up around 80% (5.50 down to 1), leaving very little left to earn, while retaining the risk of seeing a big turnaround tomorrow.
The big down day sounds like a good excuse to sell some puts. Ordinarily I would, but today I think I'm going to wait and see what tomorrow brings. I also think I'm using last quarter's behavior too much - I just remember the day after, the day after P/D, as the start of a series of down days. Something better than opening puts after a $45 down day, is opening them after another $30 down.
I did close the 1240 calls opened yesterday. Those were up around 80% (5.50 down to 1), leaving very little left to earn, while retaining the risk of seeing a big turnaround tomorrow.
TheTalkingMule
Distributed Energy Enthusiast
Flip back a few pages, I asked the same thing and folks provided input.
TheTalkingMule
Distributed Energy Enthusiast
Did the same this morning. A bit early, but 50% profit on CC's is fine when I suspect we'll be above my strike on Thurs. I'll just resell a higher yet still risky position and take the cash if it executes.
Lord knows MM's will rinse and repeat today's action when the Fed opens its mouth next Tues. Then I can rebuy shares or sell BPS. Tuesday, right?
jeewee3000
Active Member
Random trade report: flipped a 4/22 -1150cc to a 5/20 -990csp for a slight credit.
Reason: want to get rid of cc's since I expect upward pressure into split (at unknown times) and I feel by 4/22 we will be over 1150 for sure. Also I'm quite confident we won't be under 990 by 5/20.
Reason: want to get rid of cc's since I expect upward pressure into split (at unknown times) and I feel by 4/22 we will be over 1150 for sure. Also I'm quite confident we won't be under 990 by 5/20.
The next CPI report is April 12th.
That's Tuesday and I'm expecting the inflation reading to be bad. I don't know consensus, but last was 7.9% and I expect this one to be higher (a month for gas prices to seep in for instance). And I expect a general market sell off, either between now and then anticipating the result, or soon after. I expect a similar sell off in TSLA, even though I also consider Tesla to be a safe haven for inflation and interest rate reasons.
I don't expect it, but I also won't be badly surprised if we get a .25 bump in target interest rates from the Fed as a between-meeting change. Its been threatened before - now seems like the right setup for that sort of thing. Something that tells everybody that the Fed is really serious about inflation, and recognizes that if 2.5% (ish) is neutral monetary policy, then we're STILL in an aggressive economic stimulation stance.
I also expect the market to 'forget' about the inflation reading pretty fast - a week at most.
How big will those sell offs be? WHen do they start? How long do they last? Yeah - I dunno either. My mental model though is something like start of Q1. If that's correct then we've got a couple of months of more down than up coming.
For those aggressive cc's I'm holding them for now. My plan is to evaluate where we're at late in the week. The general idea is that I have a bias towards selling those shares, but I'm also looking to collect $8+ credits, and if a roll of those calls will get me that credit (or larger - preferably much larger), then I'll stay in calls rather than switch over to cash. The shift to cash will mean I start selling puts, and those puts will probably be $6 credits per week and lower.
Bigger picture its the weekly credits I care about, with the strike to strike changes on share purchase / sales needing to be neutral or positive. Non-existent is also fine - I'd like to gain a few shares as we cycle up and down but I'm not thrilled with trying to time the market. As long as the share price is in the neighborhood of $1100 I'll be partying with the calls
Two related ideas that I want to get written out, at least for my own edification and thinking things through. I think this will turn into 3 posts - a general principles post, one for calls, and one for puts.
NOT-ADVICE
My focus is on income. I lost track of that late last year and early this year, so this is my strategic approach to the recovery.
- I pretty much have 2 investments; cash and TSLA
- Being retired I like the dampening effect of cash. Simplistically a 50/50 cash/shares portfolio will improve 2% on a 4% up day, and lose 2% on a 4% down day. This is highly desirable to my way of thinking. Its sort of like owning bonds in a stock portfolio - they have a bit differently than stock, and in either case they don't move around as dramatically.
- my long term bias in the shares and company is strongly upwards. As a result I want to own, on average, more shares than not. Putting some #s to this, I'd like to be 50-90% account value in shares over time, and 10-50% cash in account value over time.
- In the middle(ish) of the trading range I'd like to be 50/50.
- I do all of my math in terms of csp and scc with no margin. These are roll-forever positions if needed, though I plan to use Wheel like choices more aggressively than sticking with roll-forever.
- I did math on this earlier. I use $2 credit/contract/week as the floor for my weekly results. Put or call, as long as each can clear $2 in a week then I'm golden. I'd like to reach more like $8, though that might be too risky (closer evaluation needed). I think $4 as a longer run norm is reasonably straightforward.
I'll get into more details on call and put side. What I mean by Wheel like choices is more of a strategic wheel than a tactical wheel. That is to say - rather than taking an individual position and cycling regularly back and forth between cash and shares, I'll be taking positions that are designed to expire worthless. Over a larger time window I'll look to take some assignments on puts at a relatively low share price, and assignments on calls at relatively high share prices (buy low, sell high).
The 'relatively' will move over time. Today I have a mental trading range of 800 to 1200. I'll move that up and down as needed, but the 1100ish share price we've got right now makes today a relatively high share price. The recent share price of 800 is of course relatively low.
I don't have this fully implemented everywhere I'd like it running. I do have 1 lead account though where this is fully implemented and I like how its working out. The results aren't dramatic but I like how its working.
NOT-ADVICE
My focus is on income. I lost track of that late last year and early this year, so this is my strategic approach to the recovery.
- I pretty much have 2 investments; cash and TSLA
- Being retired I like the dampening effect of cash. Simplistically a 50/50 cash/shares portfolio will improve 2% on a 4% up day, and lose 2% on a 4% down day. This is highly desirable to my way of thinking. Its sort of like owning bonds in a stock portfolio - they have a bit differently than stock, and in either case they don't move around as dramatically.
- my long term bias in the shares and company is strongly upwards. As a result I want to own, on average, more shares than not. Putting some #s to this, I'd like to be 50-90% account value in shares over time, and 10-50% cash in account value over time.
- In the middle(ish) of the trading range I'd like to be 50/50.
- I do all of my math in terms of csp and scc with no margin. These are roll-forever positions if needed, though I plan to use Wheel like choices more aggressively than sticking with roll-forever.
- I did math on this earlier. I use $2 credit/contract/week as the floor for my weekly results. Put or call, as long as each can clear $2 in a week then I'm golden. I'd like to reach more like $8, though that might be too risky (closer evaluation needed). I think $4 as a longer run norm is reasonably straightforward.
I'll get into more details on call and put side. What I mean by Wheel like choices is more of a strategic wheel than a tactical wheel. That is to say - rather than taking an individual position and cycling regularly back and forth between cash and shares, I'll be taking positions that are designed to expire worthless. Over a larger time window I'll look to take some assignments on puts at a relatively low share price, and assignments on calls at relatively high share prices (buy low, sell high).
The 'relatively' will move over time. Today I have a mental trading range of 800 to 1200. I'll move that up and down as needed, but the 1100ish share price we've got right now makes today a relatively high share price. The recent share price of 800 is of course relatively low.
I don't have this fully implemented everywhere I'd like it running. I do have 1 lead account though where this is fully implemented and I like how its working out. The results aren't dramatic but I like how its working.
More NOT-ADVICE (Calls)
Turns out that the calls and puts dynamics are different in this strategic wheel. This pretty much arises solely from my long term bias upwards in the shares.
On the call side I would like account value to be 50% or more of the account. Maybe down to 40% on a really big push to higher share prices. To the degree this is how it works out I won't take full advantage of moves upwards. I WILL get some of the big move upwards and when its just another head fake then I'll get some share sales at relatively high share prices.
So how do I think that this works?
- as share price moves relatively higher (MHO current range 800-1200), become generally more aggressive with cc sales. I might be $50 OTM with shares at $1200, when the 850 strike might be much too aggressive with shares at 750.
- as the share price moves lower, get less aggressive / more conservative with the cc strikes
- look to move some of the account value from shares to cash at relatively high prices. This might take the form of an actual cc assignment; it might just mean selling some shares.
- the dynamic will be lowering a high % account value in shares towards the 50/50 level. At relatively lower prices probably target 1/3rd cash and 2/3rds shares
- for the actual cc assignments, I'll break the shares into those that I want to sell and those that I want to keep. As an example - maybe I have 7 cc's I'm selling, but at a relatively high price I'd like that to be 5. Put 2 of those into the "sell now" camp and start being really aggressive about the cc sales on those 2. The other 5 - those continue with normal treatment. Maybe later with shares at 1300 I decide to sell 1 more of those 5; put it into the aggressive camp.
- continue with the more tactical approach of selling cc's on up days, and selling csp on down days. Early closes, all that stuff.
This all sounds good. However one difficulty I've already experiences is in the details. I mentally sold some shares yesterday at $1133 (relatively high share price) in order to shift some shares value to cash. The difficulty is that had I actually made that sale then I'd have a bunch of additional cash to sell puts with, while still at a relatively high share price. Relatively aggressive cc's would eventually be replaced by relatively conservative puts to turn the cash back into shares, but who knows how long that will go on? In the meantime I've got cash I'm using to sell very conservative puts, and income drops.
What I settled on and I think I really like - I sold an ATM (actually fairly far ITM) cc in lieu of actually selling the shares. Specifically I sold the 1100 strike cc with shares at 1133, collecting a $48 credit. My thinking, given these are roll-forever positions being used to generate income, is that I sold at 1133 and was paid $15 for the privilege.
I see 3 outcomes from here.
1) Share price heads for the moon, I take assignment, and sell for the equivalent of 1148. These are shares I wanted to sell anyway, so I got an extra $15 credit in the week. Against a target of $2-8/contract/week, $15 is an awesome outcome. There might look like opportunity cost loss, but I actually mitigated that opportunity cost loss by $15. Time isn't really a factor as this was a 1 week delay in completing the shares to cash conversion.
2) Shares are flattish to down (stay in the vicinity of the 1100 strike). I can either take assignment and sell for 1148 equivalent. Or sell a follow up cc that is really aggressive. Maybe I sell the 1100 again, even with shares at 1110. The deciding factor here - do I still have a really high strike (relatively) and am I collecting say $10 credit or better, and are these shares that I want to sell to move my towards my bigger picture goal of 50/50 at relatively high share prices? If I can sell these cc's and collect >$10/week, then this will be better income than shifting over to cash and put sales.
- And if the share price drifts up slowly enough then I'll collect some strike improvements and drift up with it. I might get higher and higher sales prices, while collecting really high cc credits (but unlikely).
3) Shares drop a lot. Keep the $48 income for that week, and continue selling less aggressive cc's as the share price moves back towards middle(ish) and bottom of the trading range. This is just my standard cc sales approach, but with the bonus that I get that brief window of really high cc credits.
#3 solves an important problem in cycling back and forth between cash and shares. I retain the shares throughout and avoid a timing decision for actual selling and buying. The decision was made for me then hyper-aggressive cc didn't get assigned, and I had a few weeks of outsized income.
Turns out that the calls and puts dynamics are different in this strategic wheel. This pretty much arises solely from my long term bias upwards in the shares.
On the call side I would like account value to be 50% or more of the account. Maybe down to 40% on a really big push to higher share prices. To the degree this is how it works out I won't take full advantage of moves upwards. I WILL get some of the big move upwards and when its just another head fake then I'll get some share sales at relatively high share prices.
So how do I think that this works?
- as share price moves relatively higher (MHO current range 800-1200), become generally more aggressive with cc sales. I might be $50 OTM with shares at $1200, when the 850 strike might be much too aggressive with shares at 750.
- as the share price moves lower, get less aggressive / more conservative with the cc strikes
- look to move some of the account value from shares to cash at relatively high prices. This might take the form of an actual cc assignment; it might just mean selling some shares.
- the dynamic will be lowering a high % account value in shares towards the 50/50 level. At relatively lower prices probably target 1/3rd cash and 2/3rds shares
- for the actual cc assignments, I'll break the shares into those that I want to sell and those that I want to keep. As an example - maybe I have 7 cc's I'm selling, but at a relatively high price I'd like that to be 5. Put 2 of those into the "sell now" camp and start being really aggressive about the cc sales on those 2. The other 5 - those continue with normal treatment. Maybe later with shares at 1300 I decide to sell 1 more of those 5; put it into the aggressive camp.
- continue with the more tactical approach of selling cc's on up days, and selling csp on down days. Early closes, all that stuff.
This all sounds good. However one difficulty I've already experiences is in the details. I mentally sold some shares yesterday at $1133 (relatively high share price) in order to shift some shares value to cash. The difficulty is that had I actually made that sale then I'd have a bunch of additional cash to sell puts with, while still at a relatively high share price. Relatively aggressive cc's would eventually be replaced by relatively conservative puts to turn the cash back into shares, but who knows how long that will go on? In the meantime I've got cash I'm using to sell very conservative puts, and income drops.
What I settled on and I think I really like - I sold an ATM (actually fairly far ITM) cc in lieu of actually selling the shares. Specifically I sold the 1100 strike cc with shares at 1133, collecting a $48 credit. My thinking, given these are roll-forever positions being used to generate income, is that I sold at 1133 and was paid $15 for the privilege.
I see 3 outcomes from here.
1) Share price heads for the moon, I take assignment, and sell for the equivalent of 1148. These are shares I wanted to sell anyway, so I got an extra $15 credit in the week. Against a target of $2-8/contract/week, $15 is an awesome outcome. There might look like opportunity cost loss, but I actually mitigated that opportunity cost loss by $15. Time isn't really a factor as this was a 1 week delay in completing the shares to cash conversion.
2) Shares are flattish to down (stay in the vicinity of the 1100 strike). I can either take assignment and sell for 1148 equivalent. Or sell a follow up cc that is really aggressive. Maybe I sell the 1100 again, even with shares at 1110. The deciding factor here - do I still have a really high strike (relatively) and am I collecting say $10 credit or better, and are these shares that I want to sell to move my towards my bigger picture goal of 50/50 at relatively high share prices? If I can sell these cc's and collect >$10/week, then this will be better income than shifting over to cash and put sales.
- And if the share price drifts up slowly enough then I'll collect some strike improvements and drift up with it. I might get higher and higher sales prices, while collecting really high cc credits (but unlikely
).3) Shares drop a lot. Keep the $48 income for that week, and continue selling less aggressive cc's as the share price moves back towards middle(ish) and bottom of the trading range. This is just my standard cc sales approach, but with the bonus that I get that brief window of really high cc credits.
#3 solves an important problem in cycling back and forth between cash and shares. I retain the shares throughout and avoid a timing decision for actual selling and buying. The decision was made for me then hyper-aggressive cc didn't get assigned, and I had a few weeks of outsized income.
More NOT-ADVICE (puts)
To some degree this is the opposite of the call side. I think that there are enough differences though to break this out separately. The long term upwards bias in the shares enables an increased level of aggression when using csp. Besides taking assignment as the shares keep going down, I also have the ability to roll as long as I like, confident that the Tesla share price will be coming back to me.
Using bps increases the need to be conservative. I'll come back to leverage in a 4th post
On the put side I would like cash levels to be 10-50% of account value, with a 50/50 target for a fairly wide range around the mid point of the trading range. With an 800-1200 trading range, 50/50 might be 900 to 1100. That's an idea of my thought process - not something definitive.
Cash levels will go down as we approach the bottom of the trading range. Cash gets turned into shares at relatively low share price. Or cash gets added as shares are sold at relatively high prices.
So how do I think that this works?
- As the share price becomes relatively low, get more aggressive with put sales in general.
- At even lower share prices, pick some number of puts and get really aggressive (I want to buy shares now). The point here is to move some account value from cash to shares (buy low).
- With puts I think that more likely - just buy the shares rather than trying to get assigned. With my bias upwards, I don't want to get caught selling puts (that will be doing really well in a rising share price), when I could have bought shares. On this side - just buy the shares when I decide its time to buy.
The difficulty on the call side - when to sell - is really not an issue on the put side. If I'm 50/50 and the share price is 800, then its time to make that more like 25/75 and buy some shares. I don't want to risk being in a position where I'm selling aggressive puts when the share price moves back up.
Instead I'll take the relatively low share price, buy shares, and just be more aggressive about some call sales.
The tricky thing over longer cycles, to the degree that anything is tricky, is that I don't want to be 25/75 as we arrive at a relatively low share price. I want to have shifted that to 50/50 somewhere around the midpoint or above.
I think that on the call side, where I might use hyper aggressive calls when I decide to sell shares, that might only be a few weeks before I go ahead and make the share sale. I'll have to keep an eye on this. Or maybe I continue with the hyper-aggressive cc sales down to 1050ish, and then just sell the shares to return to the 50/50 state.
I could make a similar decision on the put side as the call side - get to a price that I want to buy at, and sell aggressive csp at that level for the purpose of assignment. I'll play that by ear the next time we have a bad patch for the share price.
Interesting sidebar - this is how I acquired my original Tesla shares back in 2012. I sold the 29 strike put for 1.70 and took assignment when shares finished around 27.50. Good thing I took assignment - those shares now have a cost basis of 5.50ish.
To some degree this is the opposite of the call side. I think that there are enough differences though to break this out separately. The long term upwards bias in the shares enables an increased level of aggression when using csp. Besides taking assignment as the shares keep going down, I also have the ability to roll as long as I like, confident that the Tesla share price will be coming back to me.
Using bps increases the need to be conservative. I'll come back to leverage in a 4th post
On the put side I would like cash levels to be 10-50% of account value, with a 50/50 target for a fairly wide range around the mid point of the trading range. With an 800-1200 trading range, 50/50 might be 900 to 1100. That's an idea of my thought process - not something definitive.
Cash levels will go down as we approach the bottom of the trading range. Cash gets turned into shares at relatively low share price. Or cash gets added as shares are sold at relatively high prices.
So how do I think that this works?
- As the share price becomes relatively low, get more aggressive with put sales in general.
- At even lower share prices, pick some number of puts and get really aggressive (I want to buy shares now). The point here is to move some account value from cash to shares (buy low).
- With puts I think that more likely - just buy the shares rather than trying to get assigned. With my bias upwards, I don't want to get caught selling puts (that will be doing really well in a rising share price), when I could have bought shares. On this side - just buy the shares when I decide its time to buy.
The difficulty on the call side - when to sell - is really not an issue on the put side. If I'm 50/50 and the share price is 800, then its time to make that more like 25/75 and buy some shares. I don't want to risk being in a position where I'm selling aggressive puts when the share price moves back up.
Instead I'll take the relatively low share price, buy shares, and just be more aggressive about some call sales.
The tricky thing over longer cycles, to the degree that anything is tricky, is that I don't want to be 25/75 as we arrive at a relatively low share price. I want to have shifted that to 50/50 somewhere around the midpoint or above.
I think that on the call side, where I might use hyper aggressive calls when I decide to sell shares, that might only be a few weeks before I go ahead and make the share sale. I'll have to keep an eye on this. Or maybe I continue with the hyper-aggressive cc sales down to 1050ish, and then just sell the shares to return to the 50/50 state.
I could make a similar decision on the put side as the call side - get to a price that I want to buy at, and sell aggressive csp at that level for the purpose of assignment. I'll play that by ear the next time we have a bad patch for the share price.
Interesting sidebar - this is how I acquired my original Tesla shares back in 2012. I sold the 29 strike put for 1.70 and took assignment when shares finished around 27.50. Good thing I took assignment - those shares now have a cost basis of 5.50ish.
Apologies for giving a disagree, but I think in this current macro environment we can't be confident about anything...
I agree there are a lot of ducks aligned for Tesla, but if the last months have "convinced" me anything it is that Tesla, the company, doesn't have much bearing to the short-term share price, it's all about the options flows and macro-economics, fundamentals and company news after that
Sadly
Part 4. More NOT-ADVICE (leverage)
This is my own updated view on leverage.
I was using too much leverage last year. I've reacted strongly, possibly overreacted, by going all csp and scc the last couple of months.
I'll be playing this by ear but I think I'll be keying both put and call side leverage off of csp and scc as the baseline. The target will be something like 1.5x to 2x the number of levered positions vs. the unlevered positions.
On the put side that might mean selling 5 BPS when I have cash for 3 csp. Or maybe even 6 but somewhere in that 50-100% range. The width will be pretty wide but mostly I'll select the insurance put based on its price. I won't be using anywhere near all the available cash, so an arbitrarily wide insurance put can be used so that the credit is virtually identical to the csp.
I have recently found that a $300 wide spread has the insurance put at a really low price. Let's say I need the $400 wide spread to reduce the insurance put to <5% of the short put. I can sell 2.5 of those BPS in lieu of 1 CSP. So sell 2 with the really cheap insurance, and still have some unreserved cash to later make adjustments to the position if needed.
To think of and treat these as csp, I need to build them as close to CSP as possible. Also worth noting - I haven't gotten myself into trouble using these kinds of BPS. I got myself into trouble with narrow width, high count, close to the money spreads (don't do that).
I will also be biasing towards csp at relatively high share prices as further protection from a sudden and big drop.
On the call side I plan to be buying 3 leaps for the same cost of 200 shares; those leaps will be max dated. With shares at 1080 (easy math) I'd be looking to spend $720 per leap on JUne '24s. The idea is that I want a really DITM position that behaves as much like shares as possible, while providing a small amount of leverage. This 3:2 leverage adds 50% to the number of cc I can sell, and is plenty of actual leverage for me to make use of.
My guess-of-the-moment is that the next time I'm buying shares, these are actually the kinds of positions I'll be buying. So I'll start reducing my share count again in favor of these kinds of leaps.
The other note about leverage, that is true for me - I am getting adequate (really, really good) income results without using leverage. A small amount of leverage adds enough income to make for some changes in lifestyle to the good, at risk levels for me that wouldn't have ever been a problem historically. So I'm not putting energy into thinking through how to make good use of higher levels of leverage.
This is my own updated view on leverage.
I was using too much leverage last year. I've reacted strongly, possibly overreacted, by going all csp and scc the last couple of months.
I'll be playing this by ear but I think I'll be keying both put and call side leverage off of csp and scc as the baseline. The target will be something like 1.5x to 2x the number of levered positions vs. the unlevered positions.
On the put side that might mean selling 5 BPS when I have cash for 3 csp. Or maybe even 6 but somewhere in that 50-100% range. The width will be pretty wide but mostly I'll select the insurance put based on its price. I won't be using anywhere near all the available cash, so an arbitrarily wide insurance put can be used so that the credit is virtually identical to the csp.
I have recently found that a $300 wide spread has the insurance put at a really low price. Let's say I need the $400 wide spread to reduce the insurance put to <5% of the short put. I can sell 2.5 of those BPS in lieu of 1 CSP. So sell 2 with the really cheap insurance, and still have some unreserved cash to later make adjustments to the position if needed.
To think of and treat these as csp, I need to build them as close to CSP as possible. Also worth noting - I haven't gotten myself into trouble using these kinds of BPS. I got myself into trouble with narrow width, high count, close to the money spreads (don't do that
).I will also be biasing towards csp at relatively high share prices as further protection from a sudden and big drop.
On the call side I plan to be buying 3 leaps for the same cost of 200 shares; those leaps will be max dated. With shares at 1080 (easy math) I'd be looking to spend $720 per leap on JUne '24s. The idea is that I want a really DITM position that behaves as much like shares as possible, while providing a small amount of leverage. This 3:2 leverage adds 50% to the number of cc I can sell, and is plenty of actual leverage for me to make use of.
My guess-of-the-moment is that the next time I'm buying shares, these are actually the kinds of positions I'll be buying. So I'll start reducing my share count again in favor of these kinds of leaps.
The other note about leverage, that is true for me - I am getting adequate (really, really good) income results without using leverage. A small amount of leverage adds enough income to make for some changes in lifestyle to the good, at risk levels for me that wouldn't have ever been a problem historically. So I'm not putting energy into thinking through how to make good use of higher levels of leverage.
Anecdotally I've noticed the last couple of months that my Fidelity provided news feed that is context sensitive to my investments has almost stopped providing Tesla, SpaceX, or Elon related news. It has been almost all macro and random business news entries for awhile.
My interpretation is that the Tesla Story is intact, there isn't really much in the way of news to report, and its the macro that matters.
NOT-ADVICE
I expect this month to be a back and forth between Tesla and Macro Story. Monday was the Tesla Story. Today and the next week will be Macro (Ukraine + inflation / interest rates). My marker in time is the CPI number Tuesday next week.
We'll have the Tesla Story (greater or lesser degree) for the Austin opening and Q1 report. Otherwise I see the Macro Story and mm (market manipulators er.. market makers) controlling the share price through end of May and into June.
I expect the quarterly results to be great for long term buy-and-holders; mission is right on track. I expect the short term investment community to be more muted or even negative in their reaction. That mostly means I don't see any visits to ATH territory this quarter, or if we do then they will be short lived.
The wildcard, for me, is the share split. The vote on expanding authorized shares won't happen until the annual shareholders meeting. I expect the split details and timing to be announced shortly afterwards. Its possible the details will be announced with the authorization vote I suppose in order to facilitate a smoother reaction.
Either way that split is going to provide a decently large, and spread out in time, buying pressure. I don't see the shares doubling as a result, but this is the wildcard and I could be badly wrong on this score.
AquaY
Member
On 3/14 I sold BPS 550/450 for this Friday 4/8 for $3.54
Given this red day, I decided to roll my monthly BPS 1 week earlier than planned from 5/20 to 6/17:
770/570 forward and up to 910/710 @22
1050/850 forward and down to 1025/825 @4
Hoping next month they will converge on a premium 15-20 for an 7-10% monthly return.
770/570 forward and up to 910/710 @22
1050/850 forward and down to 1025/825 @4
Hoping next month they will converge on a premium 15-20 for an 7-10% monthly return.
I am reflecting on what would be a good moment to close my -p1050 15/7 I opened when the SP was 850 3 weeks ago. Either let them theta decay or close them now since they are already +55%. However it’s a roll from my underwater positions when the SP went to $700 on the Ukrainian war day. I’d need them to expire worthless to cover one of those contracts loss. I have myself some time for the SP to recover, which I was expecting over 6 months. I was wrong obviously.
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