Wiki Selling TSLA Options - Be the House

[jeewee3000]

Urgent help requested.

Situation: Kept thinking, "How can TSLA stock go ANY lower than this?" So I continued to purchase shares on the way down . . . but they've kept going down from the Twitter "issue" and general market short-term insanity (and stupidity). So now I'm facing a Margin Call of about $0.5m and have to decrease my margin exposure or some of my precious TSLA shares will be sold out from under me by TD Ameritrade, likely later this morning.

Total shares in the margin account: ~12.5k, all other non-TSLA shares sold earlier to minimize the margin threat, but given the recent SP drop, it's not been enough.

Plan, as recommended by a few advisers at TD: Sell covered calls and buy puts (a collar).

Goal: Minimize the risk of having the shares sold/taken by the covered call, and minimize the total cost of the transaction.

Question: What is the best combination of puts and calls to achieve this goal? (Is there a formula for this?) I'm sort of shooting/guessing blindly and came up with this, but it's just from poking around on their Think or Swim platform and selecting a random date and strike prices for the calls and puts:

30 contracts for both, dated 15 Jul 2022:

Sell $1020 calls
Buy $575 puts

This gets me back to over 51% PNR (Point of No Return), which should put me out of the margin call (until the next drop, heaven forbid) . . . .

Any and all ideas, thoughts, comments, and suggestions for any better plan greatly appreciated.

Thanks!

You could sell (for example) JAN2023 $1500 covered calls for $18 each (at least) instead of the July2022 $1020 calls that net you half that and have (IMO) more risk of ending up ITM.

Not sure why you would want to buy puts AND sell calls. This would turn out problematic if the stock price were to soar. Better to only sell cc's (not against all shares) which you can still manage in case SP rises. If not, you are hedged somewhat and can even roll them down for extra credit to help with margin when we drop further.

EDIT: I wouldn't go out further than JAN2023 for cc's, since the time decay is decent the coming months. If you were to sell a JAN2024 or even JUN2024 the time decay is very slow and a drop in SP would not result in as great of a drop in call value.

 

[stealthyc]

Not sure why you would want to buy puts AND sell calls.

Selling the calls generates the cash to buy puts which are more protective of margin than just cash.

 

[intelligator]

Reading into the comments this week, seems that short term down has less resistance than up. I am okay this week with -660/+610 sold Monday. Next up are Jun 17th -840/+690 BPS that were a roll forward from a month back when we had similar slippery slope. These are tying up 90K in margin (3 times the contracts by accident) that I'd rather not lock much farther out. Which expirations should be avoided? I've seen comments suggesting to avoid earnings, middle month of quarter, June altogether in some instances. I'd like to roll once more with the aim to expire worthless, debit or credit.

 

[jeewee3000]

Selling the calls generates the cash to buy puts which are more protective of margin than just cash.

True. I just don't like wasting money

 

[TSLA Pilot]

True. I just don't like wasting money

It is done. Had to buy the puts to lower the total margin risk and get the PNR over/less than -50%.

Let's call buying those puts what it is: a 5-figure payment for what I call "Tuition of Life." In this case, tuition to learn about my "Stupid use of too much margin" problem . . . .

Thanks to all for your inputs and suggestions. Now let's hope I don't get called out and end up having to sell 3,000 TSLA shares next month!

 

[JustMe]

True. I just don't like wasting money

When you’re speeding down a mountain road and find the breaks have failed - it’s a good time to buy insurance

 

[Yoona]

my MS door handle won't open and mobile Tesla Service is fixing it

MM is paying the bill via quick IC in 30 mins... closing it now:

 

[adiggs]

With the drop this morning I closed out the 820 (and a few 800) cc opened yesterday. In for 3 out for .65 (2.50 net) and in for 6 out for 2 ($4 net) in the one day.

Using my trading rules now is also a good time to open puts. By closing those puts yesterday, even for a minimal gain, I am able to open 675/500s for this week expiration at 4.50. I've done so, as usual restricting myself to 2x csp for the number of put spreads opened. The width of the spread is becoming somewhat random for me as I select a distant strike, on a $50 multiple, with a very low cost. The $500 strike puts fit that need (<0.10 each). I chose the 675 strike partly because its different from the previous strike(s) I've used for this expiration - and mostly to be a bit further behind the support at 700.

 

[JustMe]

I think we’re bottoming out

 

[Yoona]

I think we’re bottoming out

recent 750ish is tug of war 700-800, bears winning

 

[bkp_duke]

Am I the only one that looks forward to the market closing every day?

 

[TheTalkingMule]

Resisting the urge to open 5/27 BPS, even at something like $580/480. Though I think I'll regret it come Friday close. My goal now is to stay out of trouble and clear all cash margin in my IRA before the MM's can bash me again!

 

[JustMe]

F——-

Stuck my finger in the wind, didn’t like the direction it was headed and pulled the rip cord. Sold 1/8 of our shares and closed a bunch of Dec spreads taking a significant loss

The positive here is I am a lot safer, margin-wise and I have peace of mind.

Plus, I made $2k day trading this morning so I’m confident I can work my way back.

Hope you guys are weathering this storm okay

 

[TheTalkingMule]

Resisting the urge to open 5/27 BPS, even at something like $580/480. Though I think I'll regret it come Friday close. My goal now is to stay out of trouble and clear all cash margin in my IRA before the MM's can bash me again!

We're too low, so I split the difference and dipped my toe in.

5/27 BPS $550/450 @ $2.35
(these were @ $3 10mins ago)

Gonna go slow and see if we go up tomorrow and down a lot Friday. Will sell a good bit more 5/27 BPS if we crack below $700 Fri.

 

[intelligator]

Sold a couple 5/20 -650/+600 for $4 on limit just as the price dipped under 703 and got a welcome spike to 714 and slow slide back. Based on the open interest at 700, 750, 800, I'm feeling these are relatively safe but never know. Will keep a pulse on them in the AM.

 

[chiller]

Had to move my MAY 20 800P and 820P forward one week for a small credit since the time value was 0.
Judging from the complete meltdown of the other thread I'm expecting us to be less than one week away from the bottom.

 

[WattsHappening]

The difference between this thread and the main investors' thread.

 

[dc_h]

I sold CC's aggressively yesterday to hedge against my 5-27 800-750 and 760-700 BPS that I rolled last week. I bought most of the CC's back today and will sell more tomorrow if we bounce. I'm concerned Elon twitter is going to pressure the price for the foreseeable future. Also noting that Troy Teslike has updated downward deliveries, but market analysts apparently aren't aware of the Covid situation in China. Maybe my pessimism is a local maximum bear market, but I don't see big upward drivers. Long term yes, short term?

 

[JustMe]

The difference between this thread and the main investors' thread.

It’s like a brouhaha at One Flew Over the Cuckoo’s Nest over there

 

[vikings123]

I sold CC's aggressively yesterday to hedge against my 5-27 800-750 and 760-700 BPS that I rolled last week. I bought most of the CC's back today and will sell more tomorrow if we bounce. I'm concerned Elon twitter is going to pressure the price for the foreseeable future. Also noting that Troy Teslike has updated downward deliveries, but market analysts apparently aren't aware of the Covid situation in China. Maybe my pessimism is a local maximum bear market, but I don't see big upward drivers. Long term yes, short term?

I think in general I agree with you. Keep in mind though that any run in the short term would be because of macro and/or technicals. I honestly don’t think the Shanghai slow production will have any impact until late June. I expect Tesla to recover in the short term but possibly dropped back to 700s level in early July. This is all based on the assumption that Q1 numbers will be really bad, like 250K or lower.

I sold some Aug 1100s today because of the reasons I mentioned above. I have also been day trading CCs.