Wiki Selling TSLA Options - Be the House

[Runarbt]

I did something similar, had 3/5 $760 naked puts which I rolled to $820. Remains to see how smart this was.

(I went from 14x $760 to 9x $820 - pocketed an extra $7k, and decreased margin used by 10%)

Well, this didnt age that well. :-O

I rolled down to $780 - really didnt enjoy it when my naked puts were ITM. :-/ Had to spend the premium I gained rolling up, and sell an extra naked put, so margin usage is back up and I am down in cash.. just about where I was last week. Bummer.

 

[LN1_Casey]

Thanks for clarifying.

I don't think there is any issue with shares that are already classified as long-term, but only with selling calls against shares that were still short-term at the time. The claim, I believe, is that the counter for those shares would get reset to 0.

Well, as I currently have 100 shares that I'm selling weekly calls on from a naked put I had, I can say that basis date has also remained the same as when the put was exercised. I've since sold 3 calls against those shares (bought back each), but the date of gain still remains the date I actually gained them--Jan 29th.

I don't plan on keeping these shares, so won't be able to experiment further, but I'll let this thread know of the date is reset upon selling of the shares, or if it remains the 29th.

 

[juanmedina]

Well, this didnt age that well. :-O

I rolled down to $780 - really didnt enjoy it when my naked puts were ITM. :-/ Had to spend the premium I gained rolling up, and sell an extra naked put, so margin usage is back up and I am down in cash.. just about where I was last week. Bummer.

I know the feeling.

I bought a 840p back covered because I need the money to close so calls that where underwater. I have a 830p cash covered that I may roll to next week or just get the shares assigned. I did sell some put credit spreads for this week on the way down that turned out nicely so far, I am already up 60%. I will probably close them tomorrow morning in case we keep going down.

 

[juanmedina]

I know the feeling.

I bought a 840p back covered because I need the money to close so calls that where underwater. I have a 830p cash covered that I may roll to next week or just get the shares assigned. I did sell some put credit spreads for this week on the way down that turned out nicely so far, I am already up 60%. I will probably close them tomorrow morning in case we keep going down.

I decided to buy all the calls that were in the water today, January 22 14x $1050s I could have waited longer but decided not to. I bought those at the wrong time and my timing was awful because I was changing brokerage so I couldn't close the trade early. That was my first time trying to get into selling longer term options instead of the weeklies that did for almost a year with great success. I am at -$22K for the year on call/put selling. I was up 20k on January and 10K on February so far exclusively selling puts and put spreads... when my current positions expire tomorrow I should be at -18K for the year. That was quite the learning experience.

 

[LN1_Casey]

Welp, this week has not been very kind for my plans to sell my shares and cover my margin.

In that note, I sold a 825 CC for $5 just now. As I bought the shares for 810 (Strike-premium), it's still technically a win, not even counting the other premiums that I gained during this process. I think the max pain will draw the shares up to $850, or just below, as there is a mass of Calls and Puts just at that strike, but I went with this lower strike to ensure these calls are actually taken from me.

I still morn not selling the 850 on Wednesday for next Friday, though. That'd have been a sweet return.

 

[UltradoomY]

Welp, this week has not been very kind for my plans to sell my shares and cover my margin.

In that note, I sold a 825 CC for $5 just now. As I bought the shares for 810 (Strike-premium), it's still technically a win, not even counting the other premiums that I gained during this process. I think the max pain will draw the shares up to $850, or just below, as there is a mass of Calls and Puts just at that strike, but I went with this lower strike to ensure these calls are actually taken from me.

I still morn not selling the 850 on Wednesday for next Friday, though. That'd have been a sweet return.

With options doing nothing is way different than HODL.. It's either Theta gang hitting you or the IV!
The 2/29 $850 C's are down to $10... could have sold that, closed it out and resold for tomorrow $800....
Hindsight is always 20/20 with these kinds of things.
I just appreciate everyone posting not just their wins but the bad too - helps to educate for dum dums like me.

 

[LN1_Casey]

Don't forget option sellers, free Theta on Monday as it's president's day and the stock markets are closed.

 

[UltradoomY]

Is there a historical record to look at for options pricing on a given stock (TSLA)?
Want to back date a straddle strategy and it would be helpful.

strategy if interested - buy 100 shares at the MMD Friday - Sell CC/P on Monday for 12 months out (shares convert if called away to long term gain)
Collect both premiums now for short term income
If shares called away you have the income delta from buy/sell plus premium
If trading in neutral range (unlikely) keep shares and premium and do again
If P assigned buy more and do it again

From just what I can find this straddle nets about 50% overall gain (taxes not included) per 12 months

Thoughts or help?

 

[st_lopes]

Closed 900c at 90% gain. Initiated 910c for next week.

Rolled 850p to next week, same strike (realize I miswrote my last post that I had initiated 840p) for a $9.4 credit. Decided to do this today given that time value was only pennies, with all of the options value now being extrinsic ITM value. That did crystalize a -66k loss, but with the roll leaves 180k+ of premium at play for next week.

Was hoping we would see a more vigorous bounce back today so that I could clip some of the premium through the roll, but just means next week gets to be a potentially big week - and I still like the 10 day and 20 day MA as technical support. As mentioned in main thread, it's extremely uncommon for Tesla to ride the lower-BB, and a reversion to the mean would bring it back to or above 10 and 20 day moving averages, which are currently 845 and 839 respectively.

Also OT to the wheel, but I did grab some 1500c Mar 2023 a couple days ago. At time of purchase they offered 1.64 leverage to owning shares outright based on the amount of capital I was willing to deploy. So, I am now 90% shares, 10% leaps on my core TSLA holdings. I will likely rotate more heavily in to leaps (at the expense of giving up portfolio margin for premium selling) should price continue to drop or contract, with corresponding drops to IV.

Summary of open options positions:

• Sold 10x 910c 02/19
• Sold 15x 900c 02/26 - these are looking more and more like I'll be able to finally get out of the 12/31 ladder climb; couple more weeks to go!
• Sold 35x 850p 02/19
• Bought 11x 1500c 03/17/2023

 

[bxr140]

Is there a historical record to look at for options pricing on a given stock (TSLA)?

If you know how your broker identifies a contract you can pull up a chart for that contract and then export or do whatever you want with it.

For instance, in Fidelity you can pull up: -TSLA210219C800 (with hyphen and no space)
And in Tradestation the equivalent is: TSLA 210219C800 (with space, no hyphen)

Stare at it and it becomes pretty self evident, but: [Ticker][last 2 digits of expiry year][four digits for expiry month & day][C or P][Strike Price]

Want to back date a straddle strategy and it would be helpful.

FWIW I've found complex back and forward testing of options strategies pretty difficult. I'm pretty happy with the strategy tester and walk forward optimizer in Tradestation on stocks and continuous futures rack ups, but options is a PITA because the contracts are always changing and IV is inherently unpredictable. You're really just going to have to scrape the historical data and bulldog your own code, then apply some conservatism based on the unknowns of volatility. Good luck! (FWIW my trading partner and I are working on something similar...will let you know if we make any material discoveries)

strategy if interested...

Thoughts or help?

I'd recommend isolating pre and post ~Jan 2020 data in your backtest. The later will give a false positive on returns because the position is asymmetrically biased to the upside. (There's no "downside" to upward movement of underlying for a position of [100S + -C + -P], and because of the bananas upward movement of TSLA the strategy would have realized minimal downside over the past year)[/QUOTE]

 

[UltradoomY]

If you know how your broker identifies a contract you can pull up a chart for that contract and then export or do whatever you want with it.

For instance, in Fidelity you can pull up: -TSLA210219C800 (with hyphen and no space)
And in Tradestation the equivalent is: TSLA 210219C800 (with space, no hyphen)

Stare at it and it becomes pretty self evident, but: [Ticker][last 2 digits of expiry year][four digits for expiry month & day][C or P][Strike Price]



FWIW I've found complex back and forward testing of options strategies pretty difficult. I'm pretty happy with the strategy tester and walk forward optimizer in Tradestation on stocks and continuous futures rack ups, but options is a PITA because the contracts are always changing and IV is inherently unpredictable. You're really just going to have to scrape the historical data and bulldog your own code, then apply some conservatism based on the unknowns of volatility. Good luck! (FWIW my trading partner and I are working on something similar...will let you know if we make any material discoveries)



I'd recommend isolating pre and post ~Jan 2020 data in your backtest. The later will give a false positive on returns because the position is asymmetrically biased to the upside. (There's no "downside" to upward movement of underlying for a position of [100S + -C + -P], and because of the bananas upward movement of TSLA the strategy would have realized minimal downside over the past year)

[/QUOTE]

Thanks, I really appreciate you putting some time in to respond. I am with Schwab and the data isn't as easy to aggregate. (for me)
I have made some crude excel sheets mimicking the trading testers available. I found that adding a bought put to limit downside substantially decreases the risk but only slightly diminishes the upside for return.

Will post more about the particular covered straddle/strangles I start getting into - to confirm my trading theories and to get beat up a little about what I was doing wrong.

Cheers!

 

[UltradoomY]

Well - I decided to learn the way others (like Adiggs) did with Straddles/strangles and just do it....
opened - 03/05 exp.
STO - C $850 - credit 24.75
STO - P $850 - credit 80.50
BTO - P $640 - debit 9.28
Net - +$96 x 100 = $9600
Just did the one this time to see how it works and if I need to roll quickly

We will see how badly this ages....

 

[bxr140]

I found that adding a bought put to limit downside substantially decreases the risk but only slightly diminishes the upside for return.

Yeah, bought puts are pretty common as downside protection--vertical spreads, collars, etc...lots of ways to use bought OTM puts that only reduces upside by a ~small amount. You can also consider buying the put farther out and then keeping it for a number of sold cycles. It will of course reduce your first cycle's profit potential, but you can potentially find a local-low in volatility by not restricting yourself to one point o the x-axis and your theta burn will be lower. And ultimately, the whole point is that you enable more profit to be returned during cycle N+1, ostensibly returning more sum profit.

Taking it a complicated step further, if you have a position with multiple profit generating contracts (so, more than just a single strangle/straddle), you can tailor the protective puts in quantity, strike, and expiration, for the purpose of really honing protection points relative to major price points (max pain, whatever) and delta/gamma action over time (closer contracts have higher gamma but higher theta).

 

[LN1_Casey]

Welp closed the CC I sold yesterday for $25, so a profit of about $500. Not bad, but annoying when I was intending to sell the shares instead.

Despite the free Theta on Monday, I think I’ll wait until Tuesday to sell. I may ladder some sales versus another call, it really depends on market action.

though if TSLA runs up to 830 by close I may just sell outright.

 

[UltradoomY]

Yeah, bought puts are pretty common as downside protection--vertical spreads, collars, etc...lots of ways to use bought OTM puts that only reduces upside by a ~small amount. You can also consider buying the put farther out and then keeping it for a number of sold cycles. It will of course reduce your first cycle's profit potential, but you can potentially find a local-low in volatility by not restricting yourself to one point o the x-axis and your theta burn will be lower. And ultimately, the whole point is that you enable more profit to be returned during cycle N+1, ostensibly returning more sum profit.

Taking it a complicated step further, if you have a position with multiple profit generating contracts (so, more than just a single strangle/straddle), you can tailor the protective puts in quantity, strike, and expiration, for the purpose of really honing protection points relative to major price points (max pain, whatever) and delta/gamma action over time (closer contracts have higher gamma but higher theta).

Again, many thanks! I have been in options for a long time but mostly on the buy side for C/P and C for the sell.
These little nuggets definitely help strategy and really locks down the risk/reward.
I'm starting really small for now but will expand out once I get my feet under me, not necessarily on the risk side but with more contracts.
I understand that winning once doesn't mean it will happen all the time and changing my plan only worsens the outcome. So definitely like flushing out as much as possible before hand to have a solid thesis.

 

[LN1_Casey]

Welp closed the CC I sold yesterday for $25, so a profit of about $500. Not bad, but annoying when I was intending to sell the shares instead.

Despite the free Theta on Monday, I think I’ll wait until Tuesday to sell. I may ladder some sales versus another call, it really depends on market action.

though if TSLA runs up to 830 by close I may just sell outright.

Eh, I may regret this in the future, but I sold the put-purchased shares at $802. As my cost basis with the put premium, and the call premium rounded down the total cost to about $765, it's still profitable (unless the interest slaughtered me). Just a bit disappointing.

I sold mostly because I really, really don't want to keep paying margin interest. I'd rather sell another long term put, which, since my margin cleared up with the sale, I sold a $500 strike March 21 put for a neat $400. Pocket change, but since I have the other Jan 22 put still active, my margin limits has diminished enough to not be able to get a closer strike. I may cover it if there is a run up of Tesla. It's free real estate.

 

[UltradoomY]

Eh, I may regret this in the future, but I sold the put-purchased shares at $802. As my cost basis with the put premium, and the call premium rounded down the total cost to about $765, it's still profitable (unless the interest slaughtered me). Just a bit disappointing.

I sold mostly because I really, really don't want to keep paying margin interest. I'd rather sell another long term put, which, since my margin cleared up with the sale, I sold a $500 strike March 21 put for a neat $400. Pocket change, but since I have the other Jan 22 put still active, my margin limits has diminished enough to not be able to get a closer strike. I may cover it if there is a run up of Tesla. It's free real estate.

Sleeping well is a cost that can't be measured - so that plus a profit is always good.
Probably a good exercise to calculate how much interest you actually paid for the duration vs. exposure and total margin tie up for the future to help you sleep better then with a little more out there.

 

[LN1_Casey]

Sleeping well is a cost that can't be measured - so that plus a profit is always good.
Probably a good exercise to calculate how much interest you actually paid for the duration vs. exposure and total margin tie up for the future to help you sleep better then with a little more out there.

I tried running an experiment with that last month. Unfortunately, my schemes were foiled by TSLA being TSLA, and my neat week hold/sell of 10 shares was not so neat in the end. The cleanest calculation I could figure from Jan's statement is, for $8.1k, I am charged $2.14 a day. So, for my initial margin of put-purchased shares, it was $24 a day, roughly. Pricey tomatoes! The life of a small time account.

I don't know where on TDA it can give me current month interest, so I'll have to wait until Feb's statement comes out. So this whole two week experience may have actually pushed my profitable trades into the red. I did cover some margin through the calls and a long term put I sold, but still within a large amount.

 

[ReddyLeaf]

Tesla really needs to do a 2:1 split so that options aren’t so costly and to get the SP closer to $420.

 

[adiggs]

I rolled the second strangle I've been testing with this morning. It arrived today as an 865p / 850c (yes - an inverted strangle; the put leg rolled up enabling collection of 2 premiums on that leg over the last 2 weeks). Both legs finished with a profit as both were close to being ATM - even the put that was $20 ITM (original premium was $41, so a $21 profit on this second put over the 2 weeks.

The new position is an 820/875 strangle expiring Feb 19 for $23 on each leg. This is a .35 delta put, and .40 delta call.


I'll be trying different deltas with this position - the calls have a higher delta for a given $ distance from the share price, at least right now. So the higher call delta is a similar distance OTM. In this case - ~$27 OTM on the put side, and $28 OTM on the call side (somewhat imbalanced delta yields balanced distance OTM).

I also plan to use this position to work with higher delta / more aggressive positions, such as this .35/.40 strangle.

In other positions I will also be trying lower delta strangles - maybe something more like .25/.20 with the other. At this particular point in time the .20 delta put is about $12 at the 775 strike, while the .25 call is also about $12 at the 915 strike.

First off - many pages of posts have gone by and I haven't been contributing. This is a beneficial result of the 2 week expirations I am now using (not much to say for a week, and then contributions for a week while I'm updating from the old to the new positions). It's also a result of me arriving at day 5 of retirement and being distracted.

As long as I'm counting the days of retirement, I figure I'm not really (mentally) retired. And I'm frankly not - there's this semi-conscious piece of my brain I don't exert direct control over that just knows this open ended vacation really isn't (open ended that is), and I'll need to be back at work on that project I left behind, any day now.

I figure I'll get over that


It's in the nature of strangles for one side to do well, while the other isn't.

First is an update on that 760 covered call who's saga I've been documenting. That original 760 call rolled up to 770, then 775, then 805, and then 820 (the current strike). All of the initial positions were 1 week expirations - the last one was a 2 week roll with a Feb 19 expiration. This call is now OTM! First time since roughly 5 minutes after I sold it (exaggeration - it just seems like that). This call has been as deep as $100 or so ITM, and mostly in the $50-80 ITM range. But rolling up and out to buy time and a better strike has bought me enough time that it currently looks like it'll finish OTM. Its taken most of 2 months, but its getting there. With net credits / cash flow all along the way.

The tricky bit on this option, is that all of the net credits have been accumulating in the premium of the current position. The current call was opened for a $78 premium. That's what was needed to offset the loss on the previous position (about a $75 premium when I rolled). That $78 option has decayed down to $13 premium. I could close now for an 80% (ish) gain on this latest position, but that would give back about 1/2 of all of the net credits I've collected along the way (I think it's been about $26 over this 2 months)

So I'm going to continue watching and do nothing. The principle I'm applying (so I don't need to monitor credits really closely on every position) is that once a position has been rolled due to being ITM, then whatever I roll into I will hold all the way down to about a $1 premium remaining to make sure I realize all those net credits as profit. More to come on this one (in about a week I expect).

The net today is an 855/820 strangle expiring Feb 19 - no change over the last couple of weeks, with both legs looking for time to pass.


The second strangle I started up to test with - it started as an 820/875 and is now an 820/835. I rolled the 875 down to 835 today, keeping the Feb 19 expiration, and increased the open option premium by about $6. My thinking is that with only $2 remaining to decay over this final week to expiration, I wanted more premium to decay. This is an example of the 1 side doing well while the other leg generates a small amount of cash flow and otherwise marking time. The 820p is watching time go by while the 875c leg has banked $20 ($23 to open, $3 to close), leaving a new $8 position to replace it.


My big position for Feb 19 expiration comes into today as an 855/900 strangle. I rolled the 900 call leg down to 840 for a net $6 credit ($8 instead of $2 left to decay for Feb 19), leaving me in an 855/840 strangle. I'd love for the shares to come up so that both legs are in line for an ITM finish; I'd roll them when time value is minimal and expect to get into my target leg on both sides, for a large net credit if that were to happen.

As of today I'm watching that 855 put leg for when to roll. Today it still has $6 in time value, so I've decided to allow more time to decay. If I were to roll today to March 5th then I could roll to the March 5th 830 strike put for a $1.80 credit. Rolling straight out to the same strike would be a $17 premium. Due to my focus on risk reduction and income, I'd take the 830 strike and small net credit as the safer position if the shares were to continue down.

The last time I identified one of these earlier roll opportunities and wrote about it I could have gotten a $10 better strike. Waiting when I have a good roll available now might not be a good idea (we shall see).