Wiki Selling TSLA Options - Be the House

[PcarPilot]

Take a lesson learned from me. I’ve been selling call option contracts for the last 3-4 months and doing pretty good. I know better than to sell an option around earnings because of how much potential the stock has to rise. And my strategy the last few months was that if the stock price reaches my call option strike price then I would buy the amount of shares that I have on the line with margin so that I don’t miss out on any gains.
Well last Monday when the stock was around $960-980 I sold 3 call options at a $1065 strike price expiring in 2 weeks (today) for $20. During this time I was extremely busy and super stressed with work that as tsla skyrocketed so fast I kept thinking it would come back down and it never did. And I missed my strategy of buying back shares with margin after the stock hit my strike price. Big mistake on my part for not paying enough attention.
So that $6,000 premium cost me $143,000 in lost gains just in 2 weeks. WTF. Now I’m left wondering what to do? Use that money to buy shares immediately? Sell puts? Or wait for it to drop? Ughhhhhhhhhhhh

 

[vikings123]

Take a lesson learned from me. I’ve been selling call option contracts for the last 3-4 months and doing pretty good. I know better than to sell an option around earnings because of how much potential the stock has to rise. And my strategy the last few months was that if the stock price reaches my call option strike price then I would buy the amount of shares that I have on the line with margin so that I don’t miss out on any gains.
Well last Monday when the stock was around $960-980 I sold 3 call options at a $1065 strike price expiring in 2 weeks (today) for $20. During this time I was extremely busy and super stressed with work that as tsla skyrocketed so fast I kept thinking it would come back down and it never did. And I missed my strategy of buying back shares with margin after the stock hit my strike price. Big mistake on my part for not paying enough attention.
So that $6,000 premium cost me $143,000 in lost gains just in 2 weeks. WTF. Now I’m left wondering what to do? Use that money to buy shares immediately? Sell puts? Or wait for it to drop? Ughhhhhhhhhhhh

Sorry to hear this. Since you mentioned margin I’m going to assume this is a taxable account. I don’t know if you need to withdraw taxes for money but definitely look to factor that in. These are crazy times so tough to say what will happen but short term trend for TSLA is definitely up, probably an understatement.

It is an interesting strategy but I don’t know if it’s worth it in a taxable account, and maybe you are doing this on shares with long term gains. An additional option for your strategy to employ might be to use a buy stop order(I think that’s what it’s called) at your above your break even price. Basically setup the buy order when you sell the options.

 

[vikings123]

I sell the puts as well - those 2 positions (opened yesterday and today; and both closed today) quickly became 2 of my best trades ever (in $/day/contract - I treat same day open/close as 1 day). They had aways to go, but with such an extreme move today, I decided to close anyway and evaluate next week what puts to sell then. I think the likelihood of a significantly lower share price on Monday is good.

And my guess is you're right about the manipulated price action - one of the articles floating around was about this being a 1 million contract expiration. Some of the articles suggest that this is in service of levering shares out of people's hands so that institutions can get in. If so, that looks like evidence of a share squeeze coming (as opposed to a short squeeze), and represents evidence of the company being seriously undervalued even after today's run.

Now that is an interesting thought.

This makes so much sense based on what we read on the main thread; ETRADE raising the margin requirement for TSLA and essentially forcing people to sell shares or do it for them. That combined with the slow morning and the sudden buying indicates to me they waited till the last minute to initiate the squeeze.

The 1500$ call expiry for July 10th has a low of 0.24 and a high of 46.00 meaning a 1000$ investment would have paid you over $190,000. What a crazy day, and to think that we are just getting started with this run up to the earnings call. Be careful out there.

 

[PcarPilot]

Yes it is a tax account but I’m not too worried about that.
I definitely foresee tsla hitting $2,000. How soon? Who knows? That’s why I’m up in arms about what to do lol. Definitely crazy times. I could have never predicted the stock going up $500 in 2 weeks.

 

[juanmedina]

This makes so much sense based on what we read on the main thread; ETRADE raising the margin requirement for TSLA and essentially forcing people to sell shares or do it for them. That combined with the slow morning and the sudden buying indicates to me they waited till the last minute to initiate the squeeze.

The 1500$ call expiry for July 10th has a low of 0.24 and a high of 46.00 meaning a 1000$ investment would have paid you over $190,000. What a crazy day, and to think that we are just getting started with this run up to the earnings call. Be careful out there.

That's insane... I saw that tweet yesterday about someone buying all those call and I didn't even thought anything about it. We need to start putting attention to out of the ordinary option volume like that. I guess weeklies can pay lol

 

[vikings123]

That's insane... I saw that tweet yesterday about someone buying all those call and I didn't even thought anything about it. We need to start putting attention to out of the ordinary option volume like that. I guess weeklies can pay lol

View attachment 563135

To be fair these unusual options activities happen every week so it’s tough to really know when it is the real. The previous time when it was real was when stock was trading in the 500 right after the Q1 delivery report and we saw huge call options volume for the 600 strike price. It turned to be a GS upgrade was leaked.

I don’t know what got leaked this time, maybe S&P is rolling out the red carpet even before the Q2 earnings? Speculation but you have to wonder.

 

[paydirt76]

Buying options can produce some amazing results, but those are often cancelled out by the losing trades (because time is your enemy).

All those losing trades cancelling out the amazing results...

 

[paydirt76]

Interesting dynamic I'm starting to notice - my covered calls are far enough ITM that buying them back is nearly 'free'. Free as in the loss buying back the calls is offset by the current gains in the shares (the loss is in the time value).

When the calls are up as much as the stock and you are short calls, that means you got run over by the Wheel.

 

[paydirt76]

Now I wondering if my $2150 covered call for the 24th its safe lol. I tried to close it out but the way OTM options would not drop at all in price even after big dips we had the other day.

Wow the premiums for anything on 24th are insane... Now I don't feel so good about my $1600 bucks :/

It's NOT "safe" to sell upside calls right now. That's why I started posting several weeks ago. Stop! Realized Vol will run you over. This is not a "natural" normal stock right now.

 

[paydirt76]

I think some big players woke up, plus the MM's decided it was too hard to keep capping and delta-hedged instead.

We suspect that Citadel is short a bunch of upside calls through their options market making operation. If true, they are being forced to buy the stock to hedge their short options deltas. There are more speculators buying upside, than selling upside.

 

[paydirt76]

What have I learned?

@adiggs
We're bothering to write you not to dunk on you but out of genuine concern you are not learning the correct lesson. Your problem is NOT finesse. We've previous shown that realized volatility in Tesla stock was MUCH higher than the 70%, 80%, 90% implied volatility you were selling. Before this monster move yesterday, we had a 300% realized weekly move!

Your strategy is to sell cheap insurance and as the insurance company, you are paying out much higher claims than you are collecting in insurance premiums.

We like to see bulls take full advantage of the realization of their thesis. If you are honest with yourself and do a full accounting, you will likely find you are greatly under-performing the stock. Do you really want to do that? No! Do yourself a favor and buy back your short options.

 

[vwman111]

All those losing trades cancelling out the amazing results...
View attachment 563148

Are you looking at deploying the cash for Q2 / S&P500 Inclusion / Battery Day?

 

[paydirt76]

Are you looking at deploying the cash for Q2 / S&P500 Inclusion / Battery Day?

The Aug calls you are seeing in the screenshot are from cash previously deployed to play inclusion. So the cash you are seeing is both position/risk management to keep Jun'22 around 5,000 deltas and profits from inclusion play already. My friend has already greatly benefited from inclusion via options (3.1 of total value of the account is from inclusion play)

My friend is human, so anything can happen... the battle plan was to hold remaining options until inclusion, but...

It seems like Tesla was up massive Friday because the Reuters article about S&P inclusion got syndicated wide. CNBC and NYT carried articles about S&P 500 likelihood. Everyone is catching up to what we already knew. There may be a good number of people and institutions who either didn't see the news until it was up big, or didn't make up their minds before market close. They are thinking it over on the weekend and may be buyers Monday. If this is true, Monday might represent a top prior to earnings (7/22).

Might try to get cute with things. Probably won't work.

 

[Right_Said_Fred]

Moved my position up another notch today, going from 10 sold puts 1400 (8/7) to 10 sold puts 1600 (8/7) for a premium gain of almost 80k. That was around 1758, so the timing was not quite impeccable. Not too worried, as I think we are not done yet with the squeeze. But even if I end up with 1000 shares @1600 in a few weeks' time, I'll be happy writing monthly calls 1600 against them. Even if we are 500 points lower they'll still fetch a nice premium.

 

[Tslynk67]

Moved my position up another notch today, going from 10 sold puts 1400 (8/7) to 10 sold puts 1600 (8/7) for a premium gain of almost 80k. That was around 1758, so the timing was not quite impeccable. Not too worried, as I think we are not done yet with the squeeze. But even if I end up with 1000 shares @1600 in a few weeks' time, I'll be happy writing monthly calls 1600 against them. Even if we are 500 points lower they'll still fetch a nice premium.

Dude, you've moved to the next level

 

[Right_Said_Fred]

Dude, you've moved to the next level

It was the first time that I had some doubts (fear of height) with put selling, but with a lot of good news coming up (Q3 financials is not mentioned often, but that is the major one for me) I’m not too worried that I’ll be stuck with shares at 1600 for too long. And if I am I will be selling monthly calls non-stop.

When I started this strategy a month ago I was hoping to reach a compounding return of at least 40% per year. I’m already at 42% after one month, so I still have a lot of room for error (= low premium income while being stuck with ‘expensive’ shares) for the next 11 months.

 

[Tslynk67]

It was the first time that I had some doubts (fear of height) with put selling, but with a lot of good news coming up (Q3 financials is not mentioned often, but that is the major one for me) I’m not too worried that I’ll be stuck with shares at 1600 for too long. And if I am I will be selling monthly calls non-stop.

When I started this strategy a month ago I was hoping to reach a compounding return of at least 40% per year. I’m already at 42% after one month, so I still have a lot of room for error (= low premium income while being stuck with ‘expensive’ shares) for the next 11 months.

Well I've shifted most of my trading capital into October calls and LEAPS now, anticipating much higher returns when things kick-off.

And now we have $3500 strikes, I'm not afraid to write calls again. Given that my target share price is $4k, I can risk a bit hitting that early and get some free cash in the meantime. So looking to sell 4 for end next week, but I'm holding out for $20 per contract to need a bit up to $1600 or so today or tomorrow...

 

[Right_Said_Fred]

Well I've shifted most of my trading capital into October calls and LEAPS now, anticipating much higher returns when things kick-off.

And now we have $3500 strikes, I'm not afraid to write calls again. Given that my target share price is $4k, I can risk a bit hitting that early and get some free cash in the meantime. So looking to sell 4 for end next week, but I'm holding out for $20 per contract to need a bit up to $1600 or so today or tomorrow...

Call premiums are crazy high at the moment (with a reason ofcourse). It would be a shame to not profit a bit off of that.

Just as a comparison: a month ago, with the stock at 985, I wrote monthly calls with a strike of 65 points higher and got 55.00 premium for them. If I would do that now (stock at 1515, sell call 1580 for 8/14) I would get about 195.00!

Or looking at it another way: you can now almost get the same premium for a call option that expires in 3 days as I got for that call option that expired in a month.

 

[llirk]

So I finally got into the option game after a few attempts at doing iron butterflies due to the small amount of funds in my Roth IRA. After gaining on 4 out of 5 tries, I had enough to do a July 10 straddle at 1120 (still way too conservative given the overwhelming signs that PD numbers were going to be good). From there I sold the put for what it was worth and I rolled the successful July 10 1120 call into 2 July 24 1500 calls that popped late last week. I reluctantly took advantage of this week's large call premium and wrote 1 July 17 1650 for $35 for this Friday, leaving one uncovered hoping for an uptrend going into the end of this week.

Always open to suggestions on how better to navigate the options strategies but pretty happy with myself that I've increased my Roth IRA using these different methods.

Of course. I've been writing puts this whole time in my brokerage account where I have the cash to secure a potential exercise.

 

[adiggs]

Unfortunately, I haven't gotten rid of my calls expiring today, and some of them are now ITM. When the day started, I was thinking I had plenty of cushion. No tax consequences (in an IRA), so being assigned and either selling very high delta puts next week, or eating the loss and buying them back are both viable choices. As is being assigned and then immediately buying the shares back.

I'm also thinking about rolling, but when entering rolls previously, the orders haven't been accepted (might need to call the broker to enter the roll order). To enter the orders separately, I'll need to sell the call I bought when I was planning to sell that on earnings day (and hey - that call is doing great today!)

Figured I'd update on my option sales along with learnings.

I rolled the calls out to 7/24. One position (with a net credit) is at the 1850 strike (I like that). The puts were rolled when the share price was ~1750, so both of these call positions netted a huge premium (also paid a huge premium to get out of the old position). My thinking, which is working so far, was to roll these by a week, and up if possible, and let these evolve for another week - see if they'll age out with another week to think about it.

I received a net credit on the 1850 strike and paid a net debit on the 1700 calls. I wanted a net credit on the lower strikes, but getting to a higher strike was more important to me. That net debit is effectively the loss on my position, with a possibility of getting it back.


My guess of the moment is that the 1700 strikes will be rolled again. I think my timing will be earnings day, before end of trading. This provides as much time decay as possible, and with IV crush after earnings, should get the new calls off to a nice start. If these are close enough to a net profit than I might not roll out. Or I might roll to a different strike for 7/24. Mostly holding my breath for next week


One thing I'm learning about is the 'roll' type trade. I'm not doing as well overall with these positions, but I'm looking better at escaping these positions without losing my shirt.

Happy to hear that 3500 strike calls are now available!