Wiki Selling TSLA Options - Be the House

[adiggs]

Thanks...appreciate your and @mongo thinking on this. I was partly asking to see if taxes played into your thought process. When I think about converting shares to LEAPs the eventual tax hit comes to mind (outside my IRA that is). This type of strategy would increase time risk due to theta as well as the need to make back whatever tax burden would eventually be incurred. This is what keeps me from converting long held shares to LEAPs. On the other hand, if you were holding shares currently at a loss at these levels it would make more sense to do the conversion.

I am leaning toward using profits from other strategies to buy LEAPs. These last six months or so have me a little hesitant to do anything that would increase risk to my core shares.

For the retirement accounts of course there's no tax impact.

Where this matters is the brokerage account. I'm share heavy there with low cost basis - I plan to be selling share backed cc for the most part, with any incremental purchases of shares in the form of leaps. Down the road I may well find myself taking assignment on some of those shares, but only after I've been assigned on all of the new leaps I've been adding.

 

[Max Plaid]

Is this a trick question ?. The poster asked for a LEAPS 101 lol. Why introduce him to the "max pain" land.

I'm guessing it's some sort of Munchausen syndrome by proxy thing...

My not advise in all these discussions is to be very, very careful with LEAPS - for all we know there's a recession coming up, markets could drop lower and not recover for years, regardless of the stock. This is a distinct possibility and should be factored into any decision.

Of course can be that $TSLA moons to $2000 later this year and you make an absolute fortune, I have no idea, jut pointing out the downside

 

[adiggs]

So I have Jan 23 600/800 BPS. I somehow have not been worried about these, but now I’m thinking there is something wrong with my wiring and I should take some conservative move to roll them out further.

Would you:

1) roll right now
2) roll on the next stock climb (10-20%)
3) you think stock will climb above 900 at some point before end of year so deal with it then
4) don’t do anything, stock will be above $740 (break even point) at expiration

Thoughts?

Jan '23 is 7ish months away. I expect there is a lot of time value in that position. There is a tug of war that you're balancing here. The closer to 0 time value, the better quality of the roll. The way I think about it - step 1 in a roll is to buy out the current time value. Step 2 is selling more time value than bought back.

The other side of this tug of war is that the closer to the money you are, the better quality of the roll.

One way time value approaches 0 is to be really, really DITM. Especially on a 7 month option.

You don't mention what the new position would be. Presumably it won't be Dec '23 as that won't provide enough incremental time value to improve the strike by a meaningful amount.


NOT-ADVICE
I'm biased against rolling right now. With 7 months to go there is a lot of room to run and go fully OTM. How much more room to the downside is there?

One thing to keep a close eye on is the time value in the short put. Not just the overall spread, but also specifically the short put. That's the one that can be early assigned - if that time value gets low then early assignment starts being a thing, and an early roll may be a necessity just to avoid the early assignment. My guess is you've got at least $20 in time value right now though.

 

[BornToFly]

We just zoomed past the nasdaq. Short sellers from last week covering?

 

[bkp_duke]

We just zoomed past the nasdaq. Short sellers from last week covering?

Perhaps, but still not where our beta should be putting us. I wish I had Level 2 access so I could see how bad the spoofing is.

 

[BornToFly]

I swear, if they managed to scare me into selling 18% of my shares in 2024 for the total price of $933….

 

[TheTalkingMule]

Man, 5/27 $500/400 BPS were fetching $2 at the bottom a few minutes ago. Could probably close those out for 50% later today.

These are pricing somewhere around 50% lower now. Hope you all got your weeklies in early today and are already crushing it!

I will endeavor to keep more dry powder around in the future. I'll be willing to sell BPS 8 trading days out if I absolutely have to.....but hold onto some powder until at least 3 days out.

The safest play is the goal.

 

[adiggs]

Sold 750cc for this Friday expiration, a little over $3. That reaches my weekly income standard, so I like that. Its for this week expiration and I like that. Its even an up day! (shares up $5 ).

My real thinking here is that as long as I can roll up to the 850 strike with the share price, then I'll eventually take assignment at a strike to strike gain, along with the various cc gains along the way. I think I can roll 750 out to 850 in a straightforward way, should that need arise. I might take a 2 week roll right up front (should the need arise) to ensure that I get to that higher strike.

Heck - I'd like to sell some of these leaps when the shares are in the low 900s anyway - cash % is getting lower than I like.


My net position is a 635 / 750 strangle for this week. I didn't set out to create this position - its something I've legged into. It IS a position that I like being in, having both puts and calls open at the same time.

 

[corduroy]

Do we have a consensus as to the remaining value of extrinsic that puts you in "the danger zone" for being assigned? Anything under $1 of extrinsic? I seem to remember someone being assigned on puts with $5 value

 

[adiggs]

Do we have a consensus as to the remaining value of extrinsic that puts you in "the danger zone" for being assigned? Anything under $1 of extrinsic? I seem to remember someone being assigned on puts with $5 value

My own standard is around $1, though DTE also influences that decision.

When I was previously DITM on some puts I found that I would be rolling a week ahead of time. I.e. an option that expires a week from Friday, I would be rolling it this Friday. What I would do differently the next time I go that DITM is I'll use multi-week rolls in order to get strike improvements. Maybe 2 or 3 weeks on each roll, instead of 1 week, so the strike is getting better and better. Or of course just take assignment - they'll be cash secured for me.

 

[TheTalkingMule]

Do we have a consensus as to the remaining value of extrinsic that puts you in "the danger zone" for being assigned? Anything under $1 of extrinsic? I seem to remember someone being assigned on puts with $5 value

While we're at it, I'd love to know where people get these "time value" charts. Is that something I can access in Fidelity Active Trader? Is it a simple greeks calculation?

 

[Yoona]

5/20 603-880

daytrading, 31% in 45 mins; next step is wait to STO CC

View attachment 804990

5/27 530-760

• no IC loss this year
• income low every week , but enough to pay bills
• thinking ~900 by yearend and very bullish next year (just need to be patient)
• suspecting best hope for is the stock split

 

[adiggs]

While we're at it, I'd love to know where people get these "time value" charts. Is that something I can access in Fidelity Active Trader? Is it a simple greeks calculation?

Current time value is what's left over, when ITM, by subtracting option strike from share price.

I just sold 750 strike calls. Those are OTM so the entire premium is time value ($2.50).

Were I to sell the 650 strike call, it is trading at $36. With shares at 667 there is $17 of intrinsic value (strike to strike) and the remaining $19 is time value.

 

[samppa]

5/27 530-760

• no IC loss this year
• income low every week , but enough to pay bills
• thinking ~900 by yearend and very bullish next year (just need to be patient)
• suspecting best hope for is the stock split

how wide are your ICs/spreads?

 

[TheTalkingMule]

Current time value is what's left over, when ITM, by subtracting option strike from share price.

I just sold 750 strike calls. Those are OTM so the entire premium is time value ($2.50).

Were I to sell the 650 strike call, it is trading at $36. With shares at 667 there is $17 of intrinsic value (strike to strike) and the remaining $19 is time value.

Thanks. That's what I assumed, just wanted to make sure I wasn't missing something.

So these figures change from moment to moment, based purely on what the market is paying at that strike/expiration.

 

[jeewee3000]

Thanks. That's what I assumed, just wanted to make sure I wasn't missing something.

So these figures change from moment to moment, based purely on what the market is paying at that strike/expiration.

Indeed. So higher IV = higher option pricing = more theta for a given option

 

[Yoona]

how wide are your ICs/spreads?

100

 

[dc_h]

I'm guessing it's some sort of Munchausen syndrome by proxy thing...

My not advise in all these discussions is to be very, very careful with LEAPS - for all we know there's a recession coming up, markets could drop lower and not recover for years, regardless of the stock. This is a distinct possibility and should be factored into any decision.

Of course can be that $TSLA moons to $2000 later this year and you make an absolute fortune, I have no idea, jut pointing out the downside

I have some leaps due in Sept and am beginning to push harder on CC's, which is also in reaction to ITM BPS from 760-700. I'll make enough if my 700 CC's get called or my 720 CC's or my 750's to feel great getting assigned. I need a good run up to Friday to roll the puts. I'll stay aggressive on teh CC's until we run back up. I do worry about the leaps and needing to roll them out to 23, or turn to shares. Regardless of recession, Tesla appears much stronger to weather a downturn: Pent up demand, strong balance sheet, higher margins. They'll have demand in a downturn, they can weather a long downturn without risk and they can shrink margins in a worst case scenario.

The bear market we're in, is also likely made worse by the crypto crashes. A lot of tech money dried up the last few months with crypto and TSLA is a favorite of crypto people.

 

[BornToFly]

A couple hours ago I was slightly regretting selling 700cc instead of something higher that would have earned less immediate income. What a difference a couple hours makes….

 

[intelligator]

Looks like the score is even among put and call trades. Wednesday and Thursday the 700 strike saw most of the interest. By Friday, that downward push lit up the 650 and 600 and some speculating on the call side; take note that the Y axis scale changed. Today must have been a light MM buy-back day, would have been nice if they left out the after hours draw down.

Last week I had 660 and 650 short side of 50 wide BPS that I rolled Friday, apparently could have rode it out. They are now 625 and 620 short side 50 wide that should make it through Friday. If we get a pop Tuesday, will try to sell a few CC at 765 or 770 for Friday.

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