Is your margin requirement for Tesla 40%? Do you hold anything else other than Tesla in that account? someone said that E-trade changed my margin requirement for Tesla to 50% because I only hold 700 shares of Tesla and nothing else.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Is your margin requirement for Tesla 40%? Do you hold anything else other than Tesla in that account? someone said that E-trade changed my margin requirement for Tesla to 50% because I only hold 700 shares of Tesla and nothing else.
There's really little value to a DITM -P. Its really just a shitty version of a high ∆ +C position, and only makes sense in the highest of volatility environments. The major issue is that the extrinsic value 'bubble' peaks ATM--that is, the farther you go from the money (in either direction, ITM or OTM) the extrinsic value drops off. This can be ok for a DOTM -P where you give yourself a wide safety margin, and even an slightly ITM -P where there's still a good amount of extrinsic value to burn off, but with a DITM -P the extrinsic value and corollary theta become all but irrelevant and by far your position's primary method of generating profit is from upward underlying movement. In other words, a DITM -P is explicitly a directional position that relies on its high ∆.
As noted its a shitty high ∆ position, because as underlying moves in your favor the DITM -P's ∆ decreases, progressively decreasing the rate at which the position generates profit. Not a huge deal for small underlying movement (single digit %’s) but progressively worse as price keeps going up.
Volatility also really starts to nuke potential profit as well when you start DOTM, as both the IV and Vega bubbles peak ATM. What that means is that even with NO fundamental change in volatility (which in reality would likely be unfavorable to you if price starts to shoot up), as underlying starts to come toward your DOTM strike IV and Vega will climb up their respective bubbles and in doings so naturally drive up the extrinsic value of the contract...which of course is unfavorable to you. Again, less of a deal with small underlying movement, then progressively worse.
Don't get sucked into thinking the mega credit on a DITM sold contract is a good thing. Other than what you realize as profit through directional movement of the underlying you have to give most of that credit back when you close the contract.
Anyway, IMHO far more sensible than a 900 -P would be to sell a DOTM - P for the same amount ofextrinsic value. You collect the ~same profit on time decay but you all but take the directional element out of the position. Or sell the 690 -P as you've identified and at least rake in a ton of extrinsic value. Then if you're also looking to capitalize on underlying directional movement, build a long position [that, as noted upthread many times, can include short legs].
I guess this all goes back to the notion of it being a fundamental requirement to understand how a position is actually going to generate profit before entering a position (which of course, is why you're asking the question--that's a good thing!). Bottom line, a DITM -P doesn't generally generate profit in a very efficient way.
Yes, all covered calls. I try to roughly balance the -C to -P but will sell excess covered calls if required to reign in margin on any DITM -P's. By margin I'm referring to my excess liquidity based on portfolio margin calculations, not an interest bearing negative margin balance. My -P's are generally margin backed with some degree of nakedness, although any real risk of early exercise would be covered by margin/excess liquidity.
I haven't sold anything this week. The last couple of weeks when I sell calls or puts on Monday or Tuesday I get crappy premiums and then the stock moves a lot on Wednesday and I end up underwater for the week hoping that contracts expire OTM. I am Testing that theory this week and the way is going so far I see some puts and put spread to be sold later today.
I'd recommend caution when trying to base a strategy on days of the week. Longer term there's not a lot of statistical relevance to directional probability between the days of the week, and in fact the standard deviation is pretty much equal across the week (its a slight downtrend as the week moves on). In reality, ups and downs are pretty much all governed by the bigger picture trend and much more accurately identified by other indicators; strategizing based on days of the week is heavy on trees and light on forest.
I'm a big proponent of technical analysis and real data, and if you can truly find something statistically relevant in the days of the week that's awesome (and please share, because I've hunted for something relevant for years)...but I'd encourage extreme skepticism when taking unquantified advice about days of the week and absolutely would discourage building a strategy around short term subjective observations.
I've rolled this 700/705 short strangle expiring this week to a 665/710 strangle expiring Apr 1. The call strike is a .35 delta and the put strike was the lowest strike I could get to for a net credit. The overall position was rolled for an approximately $8 net credit (9 total contracts - 5 put and 4 call - for a ~$7200 credit).
When I previously rolled the put from 650 to 700 I was more concerned with the shares continuing upwards. I think that I'll be a little bit less quick on the trigger and a bit less aggressive in a similar situation in the future. For instance - on that first roll I might have rolled to 680 or 690 instead; a smaller increase in the premium to age out this week, while leaving me with a wider range in which the shares could move profitably.
As a bonus I've accumulated enough additional cash to add a 6th put and went for the 500 strike. That's the .06 delta and worth a $5 premium (I was surprised at how high this is).
LN1_Casey
Draco dormiens nunquam titillandus
Ouch! Bad timing, that.
On the other hand, with the wall of calls at $700 and it being the triple witching week, it's probably safe.
gabeincal
Active Member
Today's trades for me
To capture short-term movements on the put side:
-1 x Mar 19 670p this morning at $26.29
+1 x Mar 19 670p noon-ish at $9.80
On the calls side, I did this yesterday:
-8 x Mar 19 720c at $8.85
Then today I rolled that into 705s based on price action
+8 x Mar 19 720c at $2.80
-8 x Mar 19 705c at $4.59
Also purchased 2 of my current favorites (now holding 11 of them with a 30% total gain, aiming for 300%)
+2 x Jan 21 1300c for $61.71 avg
To capture short-term movements on the put side:
-1 x Mar 19 670p this morning at $26.29
+1 x Mar 19 670p noon-ish at $9.80
On the calls side, I did this yesterday:
-8 x Mar 19 720c at $8.85
Then today I rolled that into 705s based on price action
+8 x Mar 19 720c at $2.80
-8 x Mar 19 705c at $4.59
Also purchased 2 of my current favorites (now holding 11 of them with a 30% total gain, aiming for 300%)
+2 x Jan 21 1300c for $61.71 avg
gabeincal
Active Member
+1 x Jan 21 1300c for $62.24
I'm expecting a green month ahead.
I'm expecting a green month ahead.
sub
Active Member
Do you mean '22 or '23? If not, you're buying expired options which I don't have the ability to do.
Well I caught the peak at $700 yesterday and closed out the rest of the $725 April 1 calls I bought when we were in the $500’s. I’m happy with the 85% return I got from that bet.
Turned around and sold 5x $800 April 9 cc for $14.10. They’re trading at $10.50 now with today’s dip.
Near term goal is to build up enough cash to sell a cash covered put that I’ll roll until assigned.
I like this job
Turned around and sold 5x $800 April 9 cc for $14.10. They’re trading at $10.50 now with today’s dip.
Near term goal is to build up enough cash to sell a cash covered put that I’ll roll until assigned.
I like this job
No way am I trading over the P&D or Earnings, stock could go in either direction very fast regardless of what's reported, ergo will be sticking to the weeklies for the next two weeks
Good point. Closed them today @ $9.00 for $2,500 profit. Not bad for a day’s “work”
I had 2x DITM 805P- assigned mostly on margin well before market open today. It's annoying, especially considering whoever exercised the Puts would likely have made more money just selling the Puts. I've managed to roll the rest of my DITM Puts over to next week and will look to roll the Puts a bit earlier in future.
I have a very large couch coming on Monday so will be able to clear out the margin and then some. Then looking for a nice rise after Monday to sell a bunch of weekly calls.
I have a very large couch coming on Monday so will be able to clear out the margin and then some. Then looking for a nice rise after Monday to sell a bunch of weekly calls.
FWIW, when we talk about Roll Thursday, that's what we're hedging against. The vast majority of assignments come overnight thurs-fri.
Also FWIW, its a good idea to keep an eye on time value of DITM -P's and -C's. If its really small, the MM will likely execute their side of the contract to reduce their hedged exposure. That's because a sold contract with ~zero time value is basically equivalent in value to the shares, especially when the MM factors in their price advantage from owning the B/A spread.
IMHO, never keep an short ITM contract with less than ~5 cents of time value, regardless how close the exporation. Roll, or close and re-allocate the capital. (I also am a proponent of rolling/closing OTM contracts with less than 5 cents time value also, but that's another scenario).
Thanks for posting - always helpful to see some of the lessons learned in hopes of not making them myself.
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