Wiki Selling TSLA Options - Be the House

[bkp_duke]

IV is high, now is exactly the time to sell substantially OTM calls. You make huge bank on them.

Worst case scenario, if you manage things right, you roll them forward to an even higher future call, but you don't let your shares get called away if the stock is that much above your call price.

You can make a TON of money off theta decay.

EDIT - as usual, not advice. Just my own strategy.

 

[Tslynk67]

I just can't see selling calls right now. There's a lot of uncertainty, could be sell the news because we all expect 500K deliveries now. But could also be a gigantically profitable quarter and the stock could keep right on running up. When we're up 700% in one year, how can you bet on "only" a 200% rise by 2023?

I'd sell puts instead, though not too close to the money either in case it is sell the news.

Truly, I'm just baffled by the relatively low IV, because my mental IV is gigantic and could go in either direction... but still more likely up.

As my "cash out" number was always $4000, I get great peace-of-mind selling calls around the $800 strike. For sure I hope they don't exercise, but if they do, well, I'm 30x up on my initial cost-basis, plus I'll make more money selling cash-covered puts.

And we will get dips, I'm certain of it, but no idea when or how much.

 

[MaxPain]

Looking for some not advice/strategy on my situation. In my Roth, I have a 705cc expiring today and a March 700 long call I bought a while back. It's looking like the 705cc will exercise as of now. I'd like to keep the 100 shares so should I just buy back the covered call or let the covered call exercise and then I exercise my long call to buy back the shares at 700?

I'm bullish on next week and don't think we'll see a dip/sell the news event.

Thanks!

 

[LN1_Casey]

Looking for some not advice/strategy on my situation. In my Roth, I have a 705cc expiring today and a March 700 long call I bought a while back. It's looking like the 705cc will exercise as of now. I'd like to keep the 100 shares so should I just buy back the covered call or let the covered call exercise and then I exercise my long call to buy back the shares at 700?

I'm bullish on next week and don't think we'll see a dip/sell the news event.

Thanks!

I would buy it back. Then you have an additional 100 shares possibility for March as well.

 

[Dancing Lemur]

Looking for some not advice/strategy on my situation. In my Roth, I have a 705cc expiring today and a March 700 long call I bought a while back. It's looking like the 705cc will exercise as of now. I'd like to keep the 100 shares so should I just buy back the covered call or let the covered call exercise and then I exercise my long call to buy back the shares at 700?

I'm bullish on next week and don't think we'll see a dip/sell the news event.

Thanks!

I second the buy-it-back plan. I still have a bunch of 700s expiring today that I’m short, which I will roll out to next week if they’re still ITM at 3:55. Right now I could roll those to 740s for no cost, giving me $4k extra upside per contract for next week.

Hopefully after the RH sell-off at 3:00, I’ll be able to do better than the 740s. Either way, though I’m surprised we’re comfortably in the 700s, I couldn’t be happier. Rolling ITM calls every week is a problem I’d like to have for all of 2021.

 

[bkp_duke]

Looking for some not advice/strategy on my situation. In my Roth, I have a 705cc expiring today and a March 700 long call I bought a while back. It's looking like the 705cc will exercise as of now. I'd like to keep the 100 shares so should I just buy back the covered call or let the covered call exercise and then I exercise my long call to buy back the shares at 700?

I'm bullish on next week and don't think we'll see a dip/sell the news event.

Thanks!

Man, this one needs some popcorn. 2h ago I would have said this would exercise. Now after the drop . . . 50/50.

My "not advice" if I were in your position, I would let it expire, don't go through the expense of buying it back. If it gets exercised, there are no tax consequences, so you can just buy back the shares (in after hours if you have AH trading privileges).

 

[dl003]

Man, this one needs some popcorn. 2h ago I would have said this would exercise. Now after the drop . . . 50/50.

My "not advice" if I were in your position, I would let it expire, don't go through the expense of buying it back. If it gets exercised, there are no tax consequences, so you can just buy back the shares (in after hours if you have AH trading privileges).

The thing is it's not going to get exercised right away. Best guess is it will settle tomorrow. If he has cash sitting around in the AH, it's fine. Otherwise...

 

[LN1_Casey]

The thing is it's not going to get exercised right away. Best guess is it will settle tomorrow. If he has cash sitting around in the AH, it's fine. Otherwise...

Might become subject to an AH SP spike.

 

[bxr140]

If you were going to open an Iron Condor like you suggest -- does it matter whether the stock price is low or high at the time?

I guess since I read that the Iron Condor is basically a bet that the stock will stay stable in the middle, I would expect it to be most profitable to open the position when the stock is NOT stable in the middle, so perhaps during the MMD is a good time after all?

The ∆ of a reasonably symmetrical double sided position (both strikes vs underlying, and any other double sided position, IC or otherwise) is always going to be very small, so any small/intraday movements have minimal affect on the position value. Also, since options (at least TSLA options which of course are weekly) are being sold on analyzing daily timeframe charts (one could argue that SPY options can be sold on something like a 15/30/60 min timeframe), its the daily timeframe price points that you're using to set your strikes, and thus you really don't have the right fidelity to really worry about shorter timeframe movements. So basically its an "enter whenever" kind of trade

Put another way, if you're playing a morning drop and recovery, you're going to be buying options, not selling them.

A Y-axis asymmetrical double sided position will pay out more as one side is closer to current underlying than the other and thus the position will have a comparatively larger ∆, but since its still a relatively low ∆ and thus not a directional position you're still not looking to time intraday movement. Again its an "enter whenever".

An X-axis (or X+Y axis) asymmetrical double position is a bit more complicated and can require a bit of daily-level timing to enter. But...if you're contemplating a position like that you don't need some advice from some yahoo on a car forum.

As I write this I think the most important takeaway for folks is that if you're at all timing the market, you should be buying contracts or entering debit positions.

 

[bxr140]

OTM Short calls is still bullish. While you can buy puts above the underlying, it's a strange strategy versus just selling puts ATM when you believe a top is achieved.

Long puts are straight bearish. (Though some buy them to cap off put spreads or to protect long positions).

My comment was in response to what I read as [implied] principals-based hesitation to buy puts because its a bet against TSLA. Sorry if I interpreted incorrectly.

In any case, a sold call at any strike is most certainly a bet against TSLA, because it has an explicitly opposite +C that is explicitly a bet for TSLA. Now whether the -C is bearish or bullish depends on the overall position--a naked OTM -C (or vertical credit spread with calls) for instance is absolutely not bullish. It is a play that says "I don't want the price to go up", where the gap between underlying and strike price is a safety buffer in the event the price does go up. If one was expecting underlying to go up, as is the case with a bullish position, one would build some position that has meaningful ∆ and, one would hope, an eye on gamma.

FTR, Upthread are my thoughts on covered calls.

 

[sub]

Hey all, been off TMC for a while, saw this thread yesterday and started reading from the beginning but I just don't have the time to read it all and get caught up. I've been looking at, testing, back testing option strategies for years. I do small options trades but one thing I don't want to do is risk my shares. I may have missed some of this in the 80 pages of this thread so apologies. I've played with the "wheel" idea on my own, never seen it called that or discussed online. How is that working out for everyone? Reading the beginning of the thread knowing how much the stock price exploded, I wonder how much better off everyone would be if they just held shares, I'm guessing dramatically.

I was looking at doing some covered calls, basic boring stuff, due to the crazy high premiums this past month. I had not been paying attention to option prices lately and now that my account is quite large, took another look to see if I could generate some income to buy more shares etc. One thing I looked at, maybe discussed already, is Historical daily/weekly moves in TSLA since IPO. I think that is a good number to know. Tesla has only moved more than 20% in a week ~9 times, 30% 2 times and 40% 1x (from 10 to 15 early on). I feel the moves on average will get small over time due to the market cap, takes much more money to move the stock the same amount today.

I'm guessing I've spent 1000 hours back testing etc using TOS (Think or swim). I have no interest in guessing market direction, that isn't my game and I'm not interested in the stress. Much easier guaranteed returns in Real Estate if you know what you're doing.

Now that premiums have collapsed, I don't think I'm interested in selling covered calls. The risk/reward isn't to my liking, talk about picking pennies up in front of a steam roller!

However, I've come up with a combination of option positions that Juices the returns on TSLA while actually lowering the downside risk slightly. The position profits more the slower TSLA rises in value and is adjustable if it hits the upper option strike. I'm not selling shares for 5-10 years so I compare all my profit/loss on these positions to just holding current share number. This position can boost returns on TSLA as much as 30% in 9 months and actually make (reduce losses compared to holding shares) 3-5% if stock goes down.

I still have to do some double, triple checking on my math to make sure I'm seeing everything correctly on my adjustments. I'd rather not discuss the strategy openly on the board just yet but if anyone is interested and wants to talk via PM and help me hash out the final details it could be lucrative. I use TOS analyze tab and on Demand, very handy. On Demand can be very frustrating at times due to incomplete data however so I've slowly started using that less and less.

 

[Runarbt]

I agree, selling CC have a poor risk/reward ratio now, CC is a bearish bet. :-/

I recently got approval selling naked puts, secured with margin in my 100% tsla account. ;-) Thats a bullish bet. And fit better todays trend.

I have sold 3x $690 puts for next friday. these are cash backed. (closed some calls, want back in shares).

I also sold 3x $650 february naked puts. Got paid $20k for these before christmas. Looking like free money so far.

 

[sub]

most of our shares are in an IRA so no margin, I can sell cash secured puts but the account is 100% in TSLA with no plans to change that for a decade. I have margin in a smaller trading account but not enough funds in there for it to matter much in comparison. I've been working on Neutral strategies that can be adjusted regardless of which way price moves. Not worth it to me with TSLA to sell a call for .50 that could potentially cost me 50-100k immediately and millions in the long run. That's just my preference, not telling other's what to do.

 

[LN1_Casey]

most of our shares are in an IRA so no margin, I can sell cash secured puts but the account is 100% in TSLA with no plans to change that for a decade. I have margin in a smaller trading account but not enough funds in there for it to matter much in comparison. I've been working on Neutral strategies that can be adjusted regardless of which way price moves. Not worth it to me with TSLA to sell a call for .50 that could potentially cost me 50-100k immediately and millions in the long run. That's just my preference, not telling other's what to do.

that’d only be true if you didn’t buy the shares back. Specifically, this thread is detailed with getting the shares back via puts.

so if you sold a cc for 750 and it popped, you could then sell cp for 750/760/770 or however much you can cover until it pops. Even in the money puts if you really want the shares back. Then you have your shares back, maybe plus some extra, and can start the process again.

With TSLA being as volatile as it is, it can turn a profit. Slowly grow a hoard of shares.

 

[sub]

that’d only be true if you didn’t buy the shares back. Specifically, this thread is detailed with getting the shares back via puts.

so if you sold a cc for 750 and it popped, you could then sell cp for 750/760/770 or however much you can cover until it pops. Even in the money puts if you really want the shares back. Then you have your shares back, maybe plus some extra, and can start the process again.

With TSLA being as volatile as it is, it can turn a profit. Slowly grow a hoard of shares.

Yes, I understand the concept of the wheel. Curious how this worked out for everyone this year when TSLA may have not been giving opportunities to get the shares back at the same or lower price? I find it hard to believe anyone made 700% with the wheel that could have been made just holding shares.

I'm all for trying to generate some cash and hoard more shares, that's why I'm in the thread.

 

[vikings123]

Yes, I understand the concept of the wheel. Curious how this worked out for everyone this year when TSLA may have not been giving opportunities to get the shares back at the same or lower price? I find it hard to believe anyone made 700% with the wheel that could have been made just holding shares.

I'm all for trying to generate some cash and hoard more shares, that's why I'm in the thread.

I cannot speak for others but I’m not using cash for selling puts. I’m using a margin account to sell short term puts. If I get assigned(happens rarely) I sell aggressive calls.

In this scenario you are not paying any interest until you get assigned. The assets in your account essentially work as collateral.

 

[juanmedina]

Yes, I understand the concept of the wheel. Curious how this worked out for everyone this year when TSLA may have not been giving opportunities to get the shares back at the same or lower price? I find it hard to believe anyone made 700% with the wheel that could have been made just holding shares.

I'm all for trying to generate some cash and hoard more shares, that's why I'm in the thread.

you are correct I don't think making 700% on wheel would have been feasible. I do the mostly the call selling part of the wheel for a 20-40% return on my shares.

Hey gang - been off The Wheel and outta this thread for a bit, had to play things ultra-cautious for a while, but now I'm back and playing much bigger stakes, i.e. with the whole of my core-shares. Why? Well I need around $600k cash out over the next 18 months to cover house renovations and taking the risk on selling covered calls seems a better bet than straight-up selling shares...

Remember, $800 is the price I'm OK to "cash out", although I would then "sell back in" with puts...

Current main position is 19th March 17x c780, which I sold for $60 per contract, ~$102k. 20% upside from when I did the sale (day before inclusion), might be tight with good P&D + Earrings, but recalling all the "sell the news" events this year, who knows?

1200 more shares to play with, but can't do anything with those until mid-end next week.

I've also $108k cash to play with - last week sold 8th Jan p617.50 for $26, just rebought for $4.80 - with the freed-up cash I just sold 29th Jan p667.50 for $40.50 - would be happy to see that exercised

And I've a sell order @ $685 for the 22 shares on my account - not much use if it's not multiple of 100, I'd rather take that cash and then get an exercise to round-up to 3000

Edit: offloaded those odd 22 shares...

why are you choosing those odd strikes for the puts? is there a good reason?

I would be fine with cashing out at $1000 and I am eyeing out the January 21st, 2022 1000c I would pull the trigger on those if IV were at least 80.

 

[bkp_duke]

Talk to @Lycanthrope, I'm pretty sure he did far better on the wheel than 700%.

These are not one OR the other decisions. The wheel, when done properly, can be applied to a position such as TSLA that rapidly appreciates in value.

 

[adiggs]

How is that working out for everyone? Reading the beginning of the thread knowing how much the stock price exploded, I wonder how much better off everyone would be if they just held shares, I'm guessing dramatically.

You are correct- just holding shares in a rising share environment like we've experienced will beat option selling like a drum. It certainly would have in my account.

The way I see it, and this is specific to my own context / circumstances, selling options provides immediate cash flow which provides protection / risk reduction in the event that the shares trade sideways or downwards. Specific to my context, I'm suddenly more concerned with protecting from these sorts of trading patterns (living off the portfolio now, rather than having a purely growth need). The portfolio has grown to "enough" for me / my family, and we're still holding the core shares that got us here. So we have enough exposure to additional upside, and I want a stable-isn income to live off of now.


I share your concern with losing shares on a covered call, and very much want to avoid that. However, I also want the income from selling the calls against them. So I balance that risk of losing shares by selling strikes I wouldn't mind selling at, even though I expect I'll roll out of those positions when needed. If the account could have doubled and I 'only' get 1.5x increase, from what was already "enough", then did I miss out on the 1/2 or did I get cash / income up front to live on that also mitigated against the opposite possibility (shares trade down, leaving me all of that premium as well as all of the shares). AND leaving me with an account that was previously "enough", and is now 1.5x "enough".

I didn't need to guess at direction, magnitude, and timing that would have told me to sell an even higher strike or just sit them out for awhile while the shares were going up enough to double the account value.

 

[EnzoXYZ]

No way selling puts without cash or margin, i think?

Schwab allow you to sell puts on margin.
I have a margin within 35% of my $tsla shares, and can sell naked puts on this.

I have no cash - 100% in $tsla.. and I have a healthy margin I can trade on.

I use Schwab also and it’s about 100K buying power per put option. Not sure how it’s calculated to 100K when the strike x 100 is no where close to that.