Wiki Selling TSLA Options - Be the House

[Mokuzai]

I engaged a tax prep/planner to navigate my financials going forward. I asked about rolling an option and if it would trigger a wash sale rule. At first he assumed it would but told me he would research more into it. This is what he came back with:

There is no concrete code, regs, or tax case law regarding rolling options and if they’d be subject to wash sale rules.

There are opinions that a different expiration date and different strike price would exclude the options from wash sale treatment, I would agree with this treatment and would report the loss without wash sale limits since the replacement option is materially different from the prior holding.

Since this year is looking to be an extremely high earning year with a lot of short term gains I'm thinking I'll roll my options to show a loss for this year on my investments. Also gives me an option to close out some sold put leaps that are profitable and dragging on my margin maintenance and still post a loss for the year. This freeing up of maintenance makes me more comfortable selling uncovered puts with the idea that I can go on margin to take assignment if necessary and start selling covered calls against those shares.

Made my final S&P play trade today with sold $575 Dec 24th puts. Providing that expires worthless that'll be an average of $15k per week of premiums since S&P announcement. Still holding onto the $560 Dec 24th calls I purchased...obviously not doing as well as we all were expecting so far this week but still up about 600%. Think it hit 1000% last Wednesday and hoping to get at least that by holding to Monday...we shall see.

 

[bxr140]

Strategy or position type have a great deal to do with probability of profit! I would say the that set up and management of the position have more to do with profitability then the actual underlying movement.

That is not at all representative of what I said.

I appreciate that you're confused; instead of rat-holing on continuing misunderstanding let me just leave with this: There is nothing inherently better (or worse) about a position simply because its entry is for credit or for debit, where "better" is a comprehensive aggregation of factors that includes any reasonable definition of "probability".

 

[juanmedina]

I sold the majority of my calls too early today but at a decent profit and stayed cash. I sold some January 22 $780s for $22 just to see what happens and I wish the IV was higher to sell some more. I am going to sell some puts also but I am going to wait until next week.

 

[LN1_Casey]

I sold the majority of my calls too early today but at a decent profit and stayed cash. I sold some January 22 $780s for $22 just to see what happens and I wish the IV was higher to sell some more. I am going to sell some puts also but I am going to wait until next week.

Jan 2022 for only $140 more than current? I'd not sell such a call.

 

[juanmedina]

Jan 2022 for only $140 more than current? I'd not sell such a call.

My mistake January 22nd 2021.

 

[Davidzhao365]

I engaged a tax prep/planner to navigate my financials going forward. I asked about rolling an option and if it would trigger a wash sale rule. At first he assumed it would but told me he would research more into it. This is what he came back with:



Since this year is looking to be an extremely high earning year with a lot of short term gains I'm thinking I'll roll my options to show a loss for this year on my investments. Also gives me an option to close out some sold put leaps that are profitable and dragging on my margin maintenance and still post a loss for the year. This freeing up of maintenance makes me more comfortable selling uncovered puts with the idea that I can go on margin to take assignment if necessary and start selling covered calls against those shares.

Made my final S&P play trade today with sold $575 Dec 24th puts. Providing that expires worthless that'll be an average of $15k per week of premiums since S&P announcement. Still holding onto the $560 Dec 24th calls I purchased...obviously not doing as well as we all were expecting so far this week but still up about 600%. Think it hit 1000% last Wednesday and hoping to get at least that by holding to Monday...we shall see.

When you roll why there is loss generated? I think most leaps should be profitable this year?

 

[adiggs]

After clearing out my 12/18 and 12/24 long calls yesterday (pretty much caught the bottom yesterday - go me! /s), I got started again selling options. Opened a short 565 put for expiration tomorrow for about a $6 premium.

That's decayed so much between yesterday and today, I rolled that up to the 595 put expiring tomorrow to get an extra $1.80 to be decaying today and tomorrow. My rationale being as simple as I consider any share price <$600 today or tomorrow to be unreachable, and I'd rather have a little bit more time value to age out (now $3 instead of ~$1.30)


I'll be considering 12/24 short put positions with an expectation I will roll into that 12/24 position tomorrow (I won't wait for expiration tomorrow). I will probably take a far distant OTM position though, just in case. Maybe that 565 strike again.

 

[EnzoXYZ]

I sold the majority of my calls too early today but at a decent profit and stayed cash. I sold some January 22 $780s for $22 just to see what happens and I wish the IV was higher to sell some more. I am going to sell some puts also but I am going to wait until next week.

I’m selling my call options that I bought the day after the inclusion news on Monday. Bunch of 600, 700, 800 of diff expiration on 12/24, 12/31, 1/15. I believe that’s the spike date. Funds adding TSLA Friday night and spilling over to Monday.
I sold only couple of puts and call very deep out of money. Next week is the most unpredictable imho and so I’ll leave it to the professionals.

 

[EnzoXYZ]

When you roll why there is loss generated? I think most leaps should be profitable this year?

Yes I believe so. Just a fancy name for selling and then buying the new option therefore a realized gain/loss.

 

[juanmedina]

I’m selling my call options that I bought the day after the inclusion news on Monday. Bunch of 600, 700, 800 of diff expiration on 12/24, 12/31, 1/15. I believe that’s the spike date. Funds adding TSLA Friday night and spilling over to Monday.
I sold only couple of puts and call very deep out of money. Next week is the most unpredictable imho and so I’ll leave it to the professionals.

My plan was to sell the options that I bought tomorrow but I chickened out after seeing them go down a lot on recent days and with the IV dropping I decided to get out. Everyone's mood was yesterday didn't help either lol oh well. I only have a few calls left that I will sell next week.

 

[Mokuzai]

When you roll why there is loss generated? I think most leaps should be profitable this year?

Back pre split when I sold the covered calls I collected about $160k in premiums. To buy those back will cost around $475k and the replacement 800 calls will give me about $500k in premiums for around $25k net credit. However the $475k spent to exit the original position hits this year's taxes and the replacement option isn't taxable until I close it which could be as far out as 2023.

 

[adiggs]

Back pre split when I sold the covered calls I collected about $160k in premiums. To buy those back will cost around $475k and the replacement 800 calls will give me about $500k in premiums for around $25k net credit. However the $475k spent to exit the original position hits this year's taxes and the replacement option isn't taxable until I close it which could be as far out as 2023.

I think that in this case, you'll be realizing a big loss for this tax year. You'll also be losing a big hunk of portfolio value, as you'll be giving away the current time premium, and that hunk of time premium is going to take awhile to recover.

I don't have a good solution - I've got some similar positions and despite any advantages to rolling now, there is too much time premium (>$100 in my case) to lose by selling now for tax benefits. I'm hoping that position resolves next year for a second year of big tax bills in a row (in my world -- big tax bill = big earnings year = first world problem; I like first world problems).

 

[clmason]

I've been waiting to enter into my next covered call position. Premiums look good. I'm thinking $800 - $900 @ mid to late January. Anyone else planning to enter into a CC position tomorrow? What strikes and expirations do you like?

 

[bkp_duke]

I've been waiting to enter into my next covered call position. Premiums look good. I'm thinking $800 - $900 @ mid to late January. Anyone else planning to enter into a CC position tomorrow? What strikes and expirations do you like?

I'm keeping a close eye on these as well, debating on entering tomorrow vs. Monday.

 

[adiggs]

I've been waiting to enter into my next covered call position. Premiums look good. I'm thinking $800 - $900 @ mid to late January. Anyone else planning to enter into a CC position tomorrow? What strikes and expirations do you like?

I would be better off having waited to today or Mon-Wed next week. That being said, like you're talking about, for CC I work the near and next month. So right now, that would be the Jan or Feb monthlies. I don't want to be more than 60 days out, and I don't want to do weeklies because I can't get to a high enough strike that still carries enough premium to bother AND it's too much time and energy.

One exception - if we had a particularly high share price and IV, I would go out more than 2 months to lock in that initial condition for a longer period.

I went with the Feb 1100 calls. The premium was pretty wimpy ($7, but it's higher today; good for you, bad for me!), but I'm trying to be far enough out that I think ITM just won't happen (delta is <0.10 on these). Also a high enough strike that being assigned creates some first world problems, but not anything like angst.

Big downside I see here - if I'd waiting to today, then I'd want to wait for Monday at least; maybe Wednesday, to see if a good 6+ month opportunity opened up.


Context - I'm transition into an income + growth orientation, away from simple growth. I forego possible growth profits, in exchange for higher likelihood short term dividend / income results.

 

[TheTalkingMule]

Just to be clear, and apologies for interrupting, but you guys are selling to close 700/800/900 calls you bought when inclusion was announced......before the actual inclusion buying starts? Wasn't the whole point to capture any IV and SP increase created by the crazy buying of shares(regardless of the SP height achieved)?

And why sell CC's with the same risk still in front of you? Wouldn't you want to wait until it's relatively clear inclusion buying is done? IV will still be high, or even higher, as we drift down a bit on the back side of inclusion.

 

[bkp_duke]

Just to be clear, and apologies for interrupting, but you guys are selling to close 700/800/900 calls you bought when inclusion was announced......before the actual inclusion buying starts? Wasn't the whole point to capture any IV and SP increase created by the crazy buying of shares(regardless of the SP height achieved)?

And why sell CC's with the same risk still in front of you? Wouldn't you want to wait until it's relatively clear inclusion buying is done? IV will still be high, or even higher, as we drift down a bit on the back side of inclusion.

@adiggs is talking about selling to open covered calls, not selling to close. The HIGH share price now and in the next few days and high IV have pushed up the price of these calls.

The expectation (and we could be wrong) is that we sell these calls now, and then there is a post-S&P inclusion drop that drastically lowers their value, and we buy to close them early for profit (25% of the original sale price) and rinse/repeat, or watch them decay into nothing on expiration in 30-60 days and pocket all 100% of the premium.

 

[juanmedina]

@pz1975 Have you started buying OTM puts? what strikes and dates do you have in mind? I never bought protective puts before. Thanks

 

[ggr]

Bad day for bearish trades.

 

[pz1975]

@pz1975 Have you started buying OTM puts? what strikes and dates do you have in mind? I never bought protective puts before. Thanks

No and I’m not sure I will unless I see a major spike maybe into the high 700s or 800s. And even then I’ll probably wait until early next week when the numbers look like all the forced buying is done or near done. This rise has been relatively controlled so far.