Wiki Selling TSLA Options - Be the House

[ReddyLeaf]

paging the experts... i don't get it, how does MarketRebellion know 4/22 1050 is buy/bullish by looking at volume? it could also be interpreted as sell/bearish, no?

View attachment 792913

Ok, this now looks like it was a short-term trade: Probably bought yesterday and sold about 1/2 today just to take some profit. Probably holding the rest, expecting a small pop next week before earnings, and will “sell on the expectation” before the news.

Wait for the right time to do this. If you had sold just 10 days ago you would have gotten more than double. Hopefully we'll get a jump around earnings and the return will be better. Find yourself a chart of the option price history to see how it reacts:

@scubastevo80 this is excellent information. I would not be selling longer term CCs at this point. At a minimum, wait until right before the earnings announcement to sell options. There will be an IV drop afterwards, maybe not much for long term options, but still some. Just like @juanmedina , I would try to time such CC sales with a major SP rise, especially ATH. Even with all the lousy macro issues, we still saw a massive $350 rise just a month ago. Wait for the next one.

Edit: ok, what just happened other than me rolling some -c1065s in to -c1020s? I was really expecting the SP to level out at $1010 today, then drop back to just below $1000 tomorrow. Apparently, I’m the absolute worst at trade timing. You’re welcome.

 

[Drezil]

Ok, this now looks like it was a short-term trade: Probably bought yesterday and sold about 1/2 today just to take some profit. Probably holding the rest, expecting a small pop next week before earnings, and will “sell on the expectation” before the news.

Or it got so hyped in the media/WSB/whatever, that people started to copy it with the uptrend today as confirmation-bias ..

One has to see if there were single big transactions or if the volume accumulated evenly over the day...

Edit: Think of the Warren-Fund. Buy what Elizabeth Warren buys/sells. You don't need to know why. She outperforms the market consistently because ... well.. she is soo good connected in politics, you know?
There are even Tik-Tok'er covering here every stock move.. making it kind of a self-fullfilling prophecy ..

 

[ReddyLeaf]

Calling @Max Plaid @adiggs @Drezil @Chenkers @Yoona and anyone else with cash/margin. Ok, talk me out of this strangle trade in an IRA, selling the IV crush:

STO 4/22 -c1015 at $42 +/-
STO 4/22 -p1015 at $42 +/-

If one is more confident of the SP direction, then the strangle could be at a lower or higher strike and achieve essentially the same premium. I’m actually thinking about the buy-write aspect of the CC side as well. I’ve been holding some extra cash and some CSPs that could be released. My -p990s are sufficiently decayed ($3.60 vs $30 next week), that it seems stupid to hold them now. Ideas?

 

[adiggs]

Edit: ok, what just happened other than me rolling some -c1065s in to -c1020s? I was really expecting the SP to level out at $1010 today, then drop back to just below $1000 tomorrow. Apparently, I’m the absolute worst at trade timing. You’re welcome.

Most of the time, this sort of trade where I'm rolling a winning position that is DOTM closer to the money works well and I earn some additional premium for the week.

The problem is the "most of the time". The other times are frequently associated with the few trades that lose money, where this trade represents the start of that loss. Most of these times still end up good, when I roll the loss a few times and end up with wins.

But the big losses where I decided to eat the loss and move on - all of them start this way. My solution - don't do that


tl;dr and not-advice. I don't do this any longer. I'll take the win and early close, but my 2 follow up rules are specifically to keep me from doing this.
1) close today, open tomorrow (or later). The only exception to this is when I close today and get a BIG regression later in the same day. That also counts, but is rare.
2) don't open a new position for the same expiration; go out a week. The exception here would be an early close with a week+ (or nearly a week) to that expiration. I.e. I have 1100 calls open right now for next week. If I had a good early close today / tomorrow, I would take it, and then probably open a new position for that same expiration on a big regression tomorrow / Monday (1 trading day later).

But if Tuesday dawns and I haven't yet opened a replacement position, then that replacement will be for a later expiration.

 

[adiggs]

Calling @Max Plaid @adiggs @Drezil @Chenkers @Yoona and anyone else with cash/margin. Ok, talk me out of this strangle trade in an IRA, selling the IV crush:

STO 4/22 -c1015 at $42 +/-
STO 4/22 -p1015 at $42 +/-

If one is more confident of the SP direction, then the strangle could be at a lower or higher strike and achieve essentially the same premium. I’m actually thinking about the buy-write aspect of the CC side as well. I’ve been holding some extra cash and some CSPs that could be released. My -p990s are sufficiently decayed ($3.60 vs $30 next week), that it seems stupid to hold them now. Ideas?

That is one heck of a big whack of up front cash (good).

My analysis, and not-advice - within that $84 window it looks really good to me. You'll also have a nearly guaranteed opportunity for an early close on one side and as long as you get a regression, then you get an early close on the other side too. Could be really good.

The risk here is that once you move away from the 1015 strike price, delta will start differing more and more, and the winning side will be winning at a lower and lower rate than the losing side. As long as you're within $84 you're in great shape. Outside of that $84 the losses will be happening fast as the winning leg will have nearly nothing left to win, while the losing leg has open ended losses available, an higher and higher delta to translate share prices nearly $ for $ into losses.

The other thing is that the time value component can easily mean that you'll need to hold to expiration. The time value on the winning leg will go to 0 faster than the losing leg. You might be holding a bad position longer than you want so that the losing leg time value can decay, hopefully minimizing the loss, but potentially increasing the loss.

I am a fan of straddles, even though I rarely trade them. The wild card here is the market reaction to Tesla Story and Macro Story, and whether its big enough to wipe out that $84.


Using my own trading objectives, this trade falls outside of that scope. I'm looking for dividend like income and this trade requires that I be right about the share price staying within $84 of 1015 as of the end of next week. I am too dependent on magnitude of any move in a world where I don't consider $100+ moves to be all that unusual, and thus not dividend like income.

But I'm also not trying to accumulate capital and this could be very good at accumulating capital / cash.

 

[Tyler34]

Calling @Max Plaid @adiggs @Drezil @Chenkers @Yoona and anyone else with cash/margin. Ok, talk me out of this strangle trade in an IRA, selling the IV crush:

STO 4/22 -c1015 at $42 +/-
STO 4/22 -p1015 at $42 +/-

If one is more confident of the SP direction, then the strangle could be at a lower or higher strike and achieve essentially the same premium. I’m actually thinking about the buy-write aspect of the CC side as well. I’ve been holding some extra cash and some CSPs that could be released. My -p990s are sufficiently decayed ($3.60 vs $30 next week), that it seems stupid to hold them now. Ideas?

MANAGE EARLY! How early? 25% profit on a straddle is a good target.

 

[adiggs]

Acted too early (in retrospect) and closed out the 950 puts for this week. $4 in, $1 out - totally hitting my income target with the position (and then some). The calls have been knocking it out of the park, so the net is much better than my minimal target.

Nothing I would change though about the early close - I had a good close and I took it. Waiting for a better close later would also mean waiting for later and hoping the close doesn't get worse. Time was on my side for a complete win, but now I'm also ready to take advantage of a move back below 1000 tomorrow, and not following the share price throughout the trading day.

 

[Yoona]

Calling @Max Plaid @adiggs @Drezil @Chenkers @Yoona and anyone else with cash/margin. Ok, talk me out of this strangle trade in an IRA, selling the IV crush:

STO 4/22 -c1015 at $42 +/-
STO 4/22 -p1015 at $42 +/-

If one is more confident of the SP direction, then the strangle could be at a lower or higher strike and achieve essentially the same premium. I’m actually thinking about the buy-write aspect of the CC side as well. I’ve been holding some extra cash and some CSPs that could be released. My -p990s are sufficiently decayed ($3.60 vs $30 next week), that it seems stupid to hold them now. Ideas?

not sure... short straddle works best on a low IV environment where sp movement is range-bound or slight up/down

but spotgamma predicted yesterday morning that today to next week is instead of flat/down (something about unusual lots of puts expiring 4/14)

so far, they are right...

 

[intelligator]

Edit: ok, what just happened other than me rolling some -c1065s in to -c1020s? I was really expecting the SP to level out at $1010 today, then drop back to just below $1000 tomorrow. Apparently, I’m the absolute worst at trade timing. You’re welcome.

That 1K settle seems less probable. I rolled to next week yesterday expecting similar for Thursday. What about the sudden high volume from 15:19 on ... bizzare.

 

[Max Plaid]

Calling @Max Plaid @adiggs @Drezil @Chenkers @Yoona and anyone else with cash/margin. Ok, talk me out of this strangle trade in an IRA, selling the IV crush:

STO 4/22 -c1015 at $42 +/-
STO 4/22 -p1015 at $42 +/-

If one is more confident of the SP direction, then the strangle could be at a lower or higher strike and achieve essentially the same premium. I’m actually thinking about the buy-write aspect of the CC side as well. I’ve been holding some extra cash and some CSPs that could be released. My -p990s are sufficiently decayed ($3.60 vs $30 next week), that it seems stupid to hold them now. Ideas?

I've done a few straddle trades and the one side always ends up going ITM pretty fast, so next time I would set a market buy order before open on both, just for the IV crush thingy

Might also play one, for shits'n'giggles... just one...

Edit: I'm going to wait on opening such a position until the day of the earnings, then see what's on offer and, of course, position ATM - and then I may decide against it

 

[Yoona]

Selling pressure in the stock market could ease next week as investors finish paying their taxes on big 2021 gains, Fundstrat says

"Our work shows that raising funds for 'capital gains' is worse in [a] year when S&P 500 gains were strong," Fundstrat said.

markets.businessinsider.com

"Next week could be a positive inflection for the stock market and deliver a solid risk/reward profile for investors as tax day passes and as earnings season gets underway, according to Lee."

 

[Drezil]

Calling @Max Plaid @adiggs @Drezil @Chenkers @Yoona and anyone else with cash/margin. Ok, talk me out of this strangle trade in an IRA, selling the IV crush:

STO 4/22 -c1015 at $42 +/-
STO 4/22 -p1015 at $42 +/-

If one is more confident of the SP direction, then the strangle could be at a lower or higher strike and achieve essentially the same premium. I’m actually thinking about the buy-write aspect of the CC side as well. I’ve been holding some extra cash and some CSPs that could be released. My -p990s are sufficiently decayed ($3.60 vs $30 next week), that it seems stupid to hold them now. Ideas?

straddles are too risky for my taste.
I would slap at least a +c1100 on that or so to cap the losses. If SP goes down & you have spare cash/margin you can just close the 1015/1100 bcs at max-gain & treat the -p1015 as an agressive version of your -p990.

But better not listen to me. I'm still in a deep hole and tax for 2020 might even break me later this year. :/

 

[Yoona]

could be nasty today

 

[wooter]

Very happy I took profits from my bps yesterday, and set up a bcs to sell at the 'right' price, expecting a drop by end of trading week. It bought at 1025 and then Elon decided to buy Twitter.

 

[juanmedina]

Now I wish I had sold more covered calls yesterday for next week. As always thanks Elon.

 

[mongo]

This has sone resemblance to the TSLA go private situation; and is interesting from an option impact perspective. So I made a thread to avoid cluttering this one.
Elon TWTR Opportunity

 

[CLK350]

This has sone resemblance to the TSLA go private situation; and is interesting from an option impact perspective. So I made a thread to avoid cluttering this one.
Elon TWTR Opportunity

Posting this here, b/c it probably would irk the main thread mods.

OR maybe keep TWTR / TSLA options stragegies here together, since both SP are intertwinned really (including long term, most likely)
This is certainly a "unique" situation - if we know anything it is that Elon doesn't back down from a fight. The ongoing fight vs the shorts and FUD, addressed mostly best by not adding to the flames, and now the open fight with the SEC- I think this is vry high stakes poker.
Considering the Russia/ Ukraine devs this is very timely.

I would say even medium term this is bullish for TSLA/ TWTR. I don't think this is going to be a distraction on Elon's time, he's put in place the right management structure already for some time now: witness how well Tesla Giga Texas /Berlin have gone. He's only using his time for critical choke points. And certainly, especially considering Tesla's mission, this is highly consistent.

Also shows how lame we (certainly I) are in terms of figuring out Elon's actions - in retrospect it makes perfect sense. But we AFAIK never anticipated this.


From @mongo 's post reproduced here

" If it goes through, my understanding is OTM options expire worthless on the sell date.
How can one profit?
Buy TWTR, sell long dated calls at $55, buy some shorter term puts to hedge?
Sell call spreads above $55? "

 

[mongo]

OR maybe keep TWTR / TSLA options stragegies here together, since both SP are intertwinned really (including long term, most likely)

From @mongo 's post reproduced here

" If it goes through, my understanding is OTM options expire worthless on the sell date.
How can one profit?
Buy TWTR, sell long dated calls at $55, buy some shorter term puts to hedge?
Sell call spreads above $55? "

View attachment 793592

Sort of, but since this is Elon personally and not a Tesla acquisition, it (hopefully) is fairly independent. Other than if Elon needed to sell more TSLA to finance the deal.
Theoretically, I think he could exercise his 2018 CEO awards, and borrow against his increased holdings (with complication of 5 year holding period, but those are only a fraction of total position).

 

[bkp_duke]

Other than if Elon needed to sell more TSLA to finance the deal.

This was my concern. Does Elon have the cash on hand to make a purchase like this?

If we have Elon selling TSLA shares / exercising options round 2, that could have a material impact on TSLA share price, again. Hopefully he would be smart enough to do it in a private sale through a broker this time.

 

[Knightshade]

This was my concern. Does Elon have the cash on hand to make a purchase like this?

He 100% does not.

He frequently remarks, including in legal filings, he's quite cash poor.

If we have Elon selling TSLA shares / exercising options round 2, that could have a material impact on TSLA share price, again. Hopefully he would be smart enough to do it in a private sale through a broker this time.

And it'd be for a much larger amount this time too.

He CAN borrow against shares, but IIRC there's a specific cap to how much any board member can do that (I think it's 25% of shares and he's already using some of it)