Wiki Selling TSLA Options - Be the House

[Xepa777]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

Oh, are we already back in the cycle of “I want to make x% on y interval” stage of the sentiment cycle here? SMH.

 

[ReddyLeaf]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

Welcome, read everything from the 1st page and listen to @sroh and @EnzoXYZ ‘s advice. FYI, I just looked up what 1% for next month would be (hint: selling 5/27 calls at $1220 strike will generate about $10 premium as of Friday close). So, while that sounds easy, there is ABSOLUTELY no way I’m selling a 1220 ($200 above the SP) for a month out. We’ve just been through a $300 rise in two weeks! We’re staring down a future stock split, massive earnings next quarter, an Elon-Bill Gates short feud, Russian-Ukrainian War, Twitter buyout, two new factories on-line, and who knows what else. I’m nervous about selling calls on Wednesday’s for this Friday and I’ve been doing this for 16 months in my IRAs (without worrying about losing shares and having to pay taxes, yet). There’s no way I would gamble with a $300K tax bill just because I guessed wrong and lost shares. FWIW, I’ve lost shares many times in the past 16 months selling calls. Unfortunately, I now have many fewer shares than last year, even though the account value is higher. I’m still selling cash-secured puts while trying to get back into shares, but the price seems to rise faster than I can keep up.

 

[Oil4AsphaultOnly]

As soon as you start thinking: "Wow, this is like free money! Why doesn't everyone do this?!?" Get ready to have your account nuked by a "black swan" event.

P.S. - We had two of those in 5 months, and many of us have still not recovered... It's easy to make money when the market is behaving and the stock is slowly moving in one direction. If you're aggressive and leveraged, one surprise can cause you to lose more money than you thought possible.

black swan survivors: "tis but a scratch!"

 

[dl003]

how are we feeling about a potential 20:1 split? I can't say I'm a fan of selling 20x the contracts and pay 20x the commission. I sell A LOT since I'm doing naked FOTM. I can comfortably make 2% a month, 3% if nothing happens unexpectedly which is a tall order sometimes in TSLA.

What I do is layering risks, making sure that I have ample margin to deal with big price spikes in the short, medium & long term. Right now, I'm selling 1200 weeklies, 1800 3 months out, and 2475 exp 1/2023. I feel like there is no way any of these positions will be threatened but I take advantage of them all as to not having to bet too much money on any given timeframe. 50% of my return is from weeklies, 25% from July calls and 25% from January calls. I looked at also doing monthlies but there's just too much overlapping between that route and the weeklies/3 month calls for my taste.

 

[FS_FRA]

Last comment - at the risk of offending you, I'm not quite sure I made my point obvious, as you mentioned AGM, as to me that's a short-term!

Hypothetical scenario - we explode to $1300 in a week or two; (one needs to suspend disbelief and check historically how many times this happened)

Now your $1000 CC will behave as a $700 CC at SP=1000
In this situation, you could roll for strike improvement and almost no credit:
a) to May for $5 strike improvement to $1005. If in May we're at $1450, how do you feel?
b) to July for $25 strike improvement to $1025. If in July we're at $1500, how do you feel?
c) to December for a $100 improvement to $1100. In in December we're at $2200, how do you feel?
d) Roll into Jan $2024 would net you $300 to $1300. But, what if we're at $4000 at that time?

Couple of those happened to me. Not saying it's bound to happen, I just want to convey my experience of thinking the worst case scenario...

No offense taken! I'm always open to a good alternate view or non-advice.

I understand your points above - it's simple for me - I will keep rolling up and out for a credit weekly until I can't. At that point I will have to decide if I take assignment (plus the tax hit) or buy back at a loss. Either way, that decision will be taken in that week.

Worst case scenario: I loose shares, take the tax hit and reset* - second worst scenario I have to take the loss on the CC. That's the risk I understood to take when I opened the position at a SP in mid-high 700s..... in the mean time I keep taking credits for a roll until I don't.

This weekend I will sit and figure out a sweet-spot model between taking the assignment and taking the loss. That might be helpful for me too. Life (and covid) unfortunately has had me otherwise occupied during the last couple of weeks.

*in the classic Wheel strategy, I then start selling aggressive puts to get the shares plus premium back ?!?

 

[Zhelko Dimic]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

Be aware that almost everyone eventually gets burnt quite badly. For me, it came three years after I started, but I feel it's almost better it happens early on, when stakes you put out are small.
You will start small, right?
And btw, spreads could lead to 100% loss of what you put on the line...

 

[saniflash]

I sold some CCs before the earnings announcement, obviously got less premium than if I’d waited until the next morning peak

Was unclear beforehand; hindsight is 20/20; nothing to beat oneself up for. I've also sold pre-call -- how would you have known that IV would spike that much post-call?

I'm curious - for each of these suboptimal situations (in retrospect) was there something you knew at the time that you also knew would lead to the sub optimal result? Is there a situation you can recognize the next time it arises, but do different then?

That's imho the healthy approach to think about stuff. If with the information available back then, and proper preparation & research you arrived at this conclusion (e.g. by looking at likelihood of being assigned/incurring a certain loss/... and consciously accepting this risk), that was the right choice to make.

This is what I would tell myself couple years back:
-ALWAYS Sell into strength (puts and call have different meanings)
-ALWAYS Sell deep out of the money
-NEVER chase premiums
-Do nothing until expiration day

100% agree based on ~4 years in this game. Great summary!!

Oh, are we already back in the cycle of “I want to make x% on y interval” stage of the sentiment cycle here? SMH.

@BLSmith2112 I would highly recommend to NOT target x% per week as the absolute premium you can generate "safely" (you have to define yourself what is "safe", e.g., choosing the strike with a 95% probability of not being assigned/underwater at expiration, and a 95% chance of being able to roll yourself out of the position in a relatively short period should it get underwater) differs substantially from week to week due to IV. So do NOT target % per week but rather do what is "safe", e.g., sell CC's / Puts based on certain % OTM per trading day.

 

[Yoona]

@BLSmith2112 I would highly recommend to NOT target x% per week as the absolute premium you can generate "safely" (i.e. with a 95% probability of not being assigned/underwater at expiration, and a 95% chance of being able to roll yourself out of the position in a relatively short period should it get underwater) differs substantially from week to week due to IV. So do NOT target % per week but rather do what is "safe", e.g., sell CC's / Puts based on certain % OTM per trading day.

 

[intelligator]

No analysis here, just sharing the data points ...

The graph are the close, flip, and gamma movement from beginning of March, with intent to identify patterns. Not really seeing one other than the daily shifts which I use to visualize open interest movement from call to put, price fluctuation driven possibly from buying and selling by MM? I then make use of these shifts to focus on what direction I will sell into. Today I may be looking at a 4DTE BPS trade.

Past Thursday, Friday and this Monday gamma exposure flowed to negative, put outweighing call interest, interest expanded from a concentration at 950-1150 to FOTM strikes, then consolidated tightly. The setup seems similar to 4/4-4/6.

 

[saniflash]

STO 1155 CC's expiring Apr 29, 2022 at open @0.60

as long as daily growth over 4 trading days does not exceed ~3.75%, these will expire OTM

 

[BornToFly]

Really did not see this coming this morning. I would have predicted 4% up over 4% down after the record earnings....

 

[EVCollies]

Welcome, read everything from the 1st page and listen to @sroh and @EnzoXYZ ‘s advice. FYI, I just looked up what 1% for next month would be (hint: selling 5/27 calls at $1220 strike will generate about $10 premium as of Friday close). So, while that sounds easy, there is ABSOLUTELY no way I’m selling a 1220 ($200 above the SP) for a month out. We’ve just been through a $300 rise in two weeks! We’re staring down a future stock split, massive earnings next quarter, an Elon-Bill Gates short feud, Russian-Ukrainian War, Twitter buyout, two new factories on-line, and who knows what else. I’m nervous about selling calls on Wednesday’s for this Friday and I’ve been doing this for 16 months in my IRAs (without worrying about losing shares and having to pay taxes, yet). There’s no way I would gamble with a $300K tax bill just because I guessed wrong and lost shares. FWIW, I’ve lost shares many times in the past 16 months selling calls. Unfortunately, I now have many fewer shares than last year, even though the account value is higher. I’m still selling cash-secured puts while trying to get back into shares, but the price seems to rise faster than I can keep up.

This is why I stopped selling cash-secured puts, even with fair returns, as the price of the put increases over time I eventually started selling fewer contracts. Using Bull Put Spreads, I'm able to use the cash to more reliably produce a fair return. Initially I used the returns to increase the amount of cash I was using for BSP's but currently using the returns to purchase SP500 as I am > 90% TSLA either stock or options and seeking a little bit more diversification.

 

[elasalle]

No offense taken! I'm always open to a good alternate view or non-advice.

I understand your points above - it's simple for me - I will keep rolling up and out for a credit weekly until I can't. At that point I will have to decide if I take assignment (plus the tax hit) or buy back at a loss. Either way, that decision will be taken in that week.

Worst case scenario: I loose shares, take the tax hit and reset* - second worst scenario I have to take the loss on the CC. That's the risk I understood to take when I opened the position at a SP in mid-high 700s..... in the mean time I keep taking credits for a roll until I don't.

This weekend I will sit and figure out a sweet-spot model between taking the assignment and taking the loss. That might be helpful for me too. Life (and covid) unfortunately has had me otherwise occupied during the last couple of weeks.

*in the classic Wheel strategy, I then start selling aggressive puts to get the shares plus premium back ?!?

Days like today prove why CC's is also a good strategy.

You can be in Cash, buy PUTS etc ... but another good way to hedge your portfolio (stocks) and the dips is by selling CC's.
(CC's - you get paid to insure your own risk )

I have been selling CC's ever since SP reached ARK's bear case of $600(pre-split). I have had to manage portfolio, CC's and stock many times over. But overall, I am doing better because I have sold CC's.

The higher SP goes, and the higher point I can sell CC's, the more easier it will be for letting the Shares get called (eventually ...). Till then you always have options to shuffle, roll etc etc.

Per my experience I don't believe in the CC is bad nonsense anymore.

Now I need to start looking at selling some of the shares from my pigg(CC)y bank and buy some LEAPS
(+ 11 jan 24 950 Calls with $$ from pigg(CC)y bank )

cheers!!

 

[phantasms]

I've got to say. It's much less stressful selling puts than calls. I've got a 930 for next Friday and I'm not sweating it at all. 100 shares at 930...yes please!

If that was a call and the stock flew up 7% for seemingly no reason I'd be freaking the F out. lol

That said, I should probably wait for a deep red day to sell for far more profit instead of simply rolling out every week to net a grand or so.

 

[juanmedina]

I was able to close another batch of my wrongly timed Dec 16 calls for a small profit. I only have a handful left but I am sad about this price action. Is Elon dumping shares?

 

[saniflash]

STO 1155 CC's expiring Apr 29, 2022 at open @0.60

as long as daily growth over 4 trading days does not exceed ~3.75%, these will expire OTM

View attachment 797655

BTC @0.25 for a profit of ~55% within ~40mins. Waiting for the price to stabilize here then will most likely sell another round later this week

 

[scubastevo80]

Sold BPS 800/700 for this Friday and have an order out to buy shares. BPS are down given they were put on when the stock was down 5.5%.

 

[Zhelko Dimic]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

With 1500 shares, if I were in your shoes, with todays drop, I'd probably sell ONE! $1000 put short for Dec'22 at current $224, and sleep rest of the year. You could add one more if we move much lower at better prices, lower strike.
You're not going to learn that much, but low stress, decent money exercise.

Or you could do one $900 strike + one $800 strike. Or some variant of it.
(well, I would probably layer 1000+1200+1400, but absolutely not recommended for someone new!!!)

The trick is to use ONLY SMALL PORTION of available margin, so that drop to much lower SP doesn't stress and scare you, and doesn't cause margin call!!!

 

[intelligator]

I have two CC I rolled out of the way a few weeks ago bad move but could't take the tax hit to have shares called away... it was a sudden spike I cornered myself into. Considering the string push down today, any thoughts on how best to deal with these?

4x Jan 2024 1200 $58,248.98cr ... -$53.700 to close
4x Sep 2022 1650 $17,237.19cr ... -$20,800 to close

EDIT: The Jan and Sep were reversed, corrected. Also, I rolled to these positions. So, the credit on the Jan 2024 is only 58248 - 52842 = $5,406 ... I'd close that at a loss of 53,700 - 5,406 = $48,294 ... the consequence of rolling up and out when DITM.

Similar for the Sep CC...

 

[FS_FRA]

No offense taken! I'm always open to a good alternate view or non-advice.

I understand your points above - it's simple for me - I will keep rolling up and out for a credit weekly until I can't. At that point I will have to decide if I take assignment (plus the tax hit) or buy back at a loss. Either way, that decision will be taken in that week.

Worst case scenario: I loose shares, take the tax hit and reset* - second worst scenario I have to take the loss on the CC. That's the risk I understood to take when I opened the position at a SP in mid-high 700s..... in the mean time I keep taking credits for a roll until I don't.

This weekend I will sit and figure out a sweet-spot model between taking the assignment and taking the loss. That might be helpful for me too. Life (and covid) unfortunately has had me otherwise occupied during the last couple of weeks.

*in the classic Wheel strategy, I then start selling aggressive puts to get the shares plus premium back ?!?

Well...sometimes things turn out differently, than you think. Used the crazy Twitter drop this a.m. to buy back the CCs ...