Wiki Selling TSLA Options - Be the House

[bxr140]

Somebody paid me $1.70 for a $29 strike put. 7 of them actually. Shares finished around 27.50 and I got paid about $1k to buy 700 shares. That one has worked out ok for me (Still have those shares)

It’s worth noting that, at least as described, the transaction net a positive $140 (as in, a hundred and forty dollars total, not including fees), and was 20 cents on the underlying from being a loss. “Paid $1k” is definitely not the whole story.

IMHO selling puts to accumulate shares is generally not ideal. If you want shares, and you think the price is going up, buy shares. If you think the price is going to go down, just wait until it hits your entry price, or ladder in on the way down/up, etc.

There’s no reason one needs to be put shares at a loss.

 

[Yoona]

Need some 'not advice' please... I sold JN@800 CC which gave me "free" 100 shares. Cost basis $615.

Given Q1's fantastic results, I won't be thrilled to sell $800 at expiration. $900 is better.

What would you normally do?
1. Sell the 100 shares and close the CC?
2. Keep the 100 shares and roll the CC?
3. What?

Thanks in advance!

 

[bkp_duke]

Need some 'not advice' please... I sold JN@800 CC which gave me "free" 100 shares. Cost basis $615.

Given Q1's fantastic results, I won't be thrilled to sell $800 at expiration. $900 is better.

What would you normally do?
1. Sell the 100 shares and close the CC?
2. Keep the 100 shares and roll the CC?
3. What?

Thanks in advance!

Me personally, given the upside I see in TSLA over the coming 5-10 years, I would roll the calls up if they look like they might get called away.

 

[gabeincal]

I want to borrow your crystal ball. You stand to make a mint off those options.

I’m holding 20 x Jan 1300s (avg price $48). Fingers crossed for a 300% on them this year.

 

[gabeincal]

Me personally, given the upside I see in TSLA over the coming 5-10 years, I would roll the calls up if they look like they might get called away.

In my experience, rolling the calls will probably not catch up to a crazy price action. But I’m sure you’ll be able to get to $900 by rolling out and up. The question is will you be back here with the same question in a month with now a longer position.....

 

[juanmedina]

I’m holding 20 x Jan 1300s (avg price $48). Fingers crossed for a 300% on them this year.

Depending how Monday turns out I may join you with some of those calls. They were $165 with the SP at $880 and IV of 80.

I was able to get 3x Jun 22 600s for $168 and 2x Mar 23 550s for $240 at good prices but I pulled the trigger to soon on 5x Jan 21 1000s at $132.

 

[Criscmt]

Rolled most of the 04/09 calls (770C) to 800 strike.
Left the few 750C I had, few in IRA account, few in a smaller account.
Plan is to roll those calls up and out if there's a risk of being called away.

If the stock goes down, will probably consider rolling them down and picking some more premium.

Ok, now’s again time to take inputs
I have 04/09 calls against almost all my shares and LEAPS. 15% on 750C, 70% on 800C, 5% on 900C.
I plan to roll them, hopefully to a reasonable strike without much loss.

Few paths for the stock I should be particularly prepared for:
Monday gaps up 10%, continues to move up. Ends 15% up from Thursday close. Tuesday continues to move up.
Monday gaps up but <=5%, progresses up gradually to 10% up over Thursday close

It appears the call prices for the Friday (04/09) will move sharply, much faster than next few weeks calls. Thus, better to not act on 04/09 calls right away in the morning, but wait for at least later in the day for 04/09 calls’ IV to go down before I roll.

Anything you guys suggest I keep in mind?

 

[st_lopes]

Ok, now’s again time to take inputs
I have 04/09 calls against almost all my shares and LEAPS. 15% on 750C, 70% on 800C, 5% on 900C.
I plan to roll them, hopefully to a reasonable strike without much loss.

Few paths for the stock I should be particularly prepared for:
Monday gaps up 10%, continues to move up. Ends 15% up from Thursday close. Tuesday continues to move up.
Monday gaps up but <=5%, progresses up gradually to 10% up over Thursday close

It appears the call prices for the Friday (04/09) will move sharply, much faster than next few weeks calls. Thus, better to not act on 04/09 calls right away in the morning, but wait for at least later in the day for 04/09 calls’ IV to go down before I roll.

Anything you guys suggest I keep in mind?

Has been said a few times in this thread, if you’re going to roll best to roll once your extrinsic value is low... usually Thursday.

 

[samppa]

I think I'm gonna sell an atm weekly put once market opens, and buy some longer term otm calls..

 

[Runarbt]

Well.. I chickened out of my CC..

Had 4x $690 4/30 (kept them in expectattion of a P&D miss)- which I closed at a loss.
Bought back at $50 - as I expect SP to be well above $740 during run-up towards Q1 ER.

Compensated by selling two $700 naked puts at same expiry, and sold one of my 5x $300 July call options (all bought on margin) to lessen my margin usage.

Still leveraged, but comfortably so. Might consider selling another put or two if we dip back down to $650-ish this week.

I really cant see us not breaching $700 in expectations for a blow-out Q1 ER. And then we have FSD news mixed into this somewhere.

 

[bxr140]

Need some 'not advice' please... I sold JN@800 CC which gave me "free" 100 shares. Cost basis $615.

Honestly I'm not sure how that math plays out, but maybe there's more to it than is represented...

What would you normally do?

1. From a macro perspective, I'd be pretty stoked that my position was a full win. Remember that when selling options you're explicitly limiting your upside potential. If it looks like you're going to maximize that potential, that's A Good Thing. That's A Good Trade.
2. I'd re-establish my price analysis. You chose June $800 for a reason. If P&D has materially changed that analysis, what is your new outlook? If P&D hasn't changed that analysis, then there's nothing to be done.
3. I'd check my FOMO before my FOMO wreck my balance.
4. Finally, I'd canvas other positions to determine if my capital could be More Better deployed, where "better" is defined by your personal strategy and risk/reward tolerance. We can all agree that if there's there's going to be a rally on which a trader wishes to capitalize then its likely IV is going up. And we can all agree that its a terrible idea to open sold positions in a rising IV environment since, as noted upthread, IV is literally the thing you're selling when you sell calls/puts. So if not a sold contract, what would position would you take instead?

 

[bxr140]

Ok, now’s again time to take inputs
I have 04/09 calls against almost all my shares and LEAPS. 15% on 750C, 70% on 800C, 5% on 900C.

Anything you guys suggest I keep in mind?

The good news is that its hard to imagine 800 being in reach this week, and (at least IMHO) even 750 is a pretty big stretch. You can burn off a lot of extrinsic value on the 750s over the next few days even if underlying keeps going up, so it could be ok to wait and see what happens.


The soapboxey news:

The covered calls are what they are; you're either going to come out ok or you're going to go ITM. Obviously if you're looking to hold the shares you should roll as much as possible, and maybe you'll be able to fully close them out (or get them out of trouble) but maybe you'll either have to pay to close them or lose the shares. Such is the agreement you made with yourself when you opened the CCs.

The calendar spreads are a little more tricky. Keep a close eye on the P/L, as--unlike covered calls--a calendar spread P/L will peak and then start eroding value as underling keeps moving up. This is because The Greeks of the sold call (primarily ∆) will overtake those of the LEAP. At some point you need to close the spreads, or at least the sold calls, or you'll keep losing money as TSLA goes up.


For a thoughts on what to do if you get in trouble (beyond just straight up rolling up and out):
--Pick and choose the sold calls to close. Your broker will likely not care whether you close a call in a CC or close it from the leap; they just want to see a favorable balance in short vs long (unless you have margin to go naked). If you have a $750 -C in a CC and a $800 -C in a calendar, if you close the $750 -C your broker will likely just reassign the $800 -C to the 100 shares and then your LEAP will no longer be part of a calendar.
--Consolidation rolls. At market prices right now you can roll 3x 750 and 1x 800 to 4x $760. Or, 1x 750 and 3x 800 to 4x $785. Find a combination that aligns with your price outlook, balancing space for underlying to run up with risk of underlying running up too far.
--Split rolls. This is pretty straightforward in a marginal account that has margin available for naked contracts--just split the value of a number of sold contracts at your current strikes across a greater number of sold contracts at higher strikes. To varying degrees this can be can also be achieved by splitting a sold contract into a higher strike sold contract plus some kind of spread.

 

[X-pilot]

I am wanting to accumulate more shares. I have 108 at the moment and have been playing with selling covered calls for the past three weeks. So far, so good. I am thinking of selling 2x $650 Apr 09 puts this coming Monday to collect a fat premium and hopefully about 200 more shares. My fear of course is whether or not that entry point is too high. Maybe I will do 1 @ $650 and 1 at $620 or so. Thoughts?

There is a little support around 652. Appears the probability of price being below 650 (ITM) is 20.26% with a delta of about -0.18. I might play one contract at 650, but would hold the other one off to see what happens. Just my opine.

 

[ReddyLeaf]

Thanks for the confirmation. Coincidentally, earlier today I sold some 4/9 800c and 4/9 620p. I felt they were pretty safe, though not a lot of premium ($1.20 & $2.09, respectively.). Definitely don’t want to lose shares, but I’m agnostic about being put shares at $620 since that means a lower SP. I’ll probably bump it up to 650p or 680p next week.

 

[Criscmt]

The good news is that its hard to imagine 800 being in reach this week, and (at least IMHO) even 750 is a pretty big stretch. You can burn off a lot of extrinsic value on the 750s over the next few days even if underlying keeps going up, so it could be ok to wait and see what happens.


The soapboxey news:

The covered calls are what they are; you're either going to come out ok or you're going to go ITM. Obviously if you're looking to hold the shares you should roll as much as possible, and maybe you'll be able to fully close them out (or get them out of trouble) but maybe you'll either have to pay to close them or lose the shares. Such is the agreement you made with yourself when you opened the CCs.

The calendar spreads are a little more tricky. Keep a close eye on the P/L, as--unlike covered calls--a calendar spread P/L will peak and then start eroding value as underling keeps moving up. This is because The Greeks of the sold call (primarily ∆) will overtake those of the LEAP. At some point you need to close the spreads, or at least the sold calls, or you'll keep losing money as TSLA goes up.


For a thoughts on what to do if you get in trouble (beyond just straight up rolling up and out):
--Pick and choose the sold calls to close. Your broker will likely not care whether you close a call in a CC or close it from the leap; they just want to see a favorable balance in short vs long (unless you have margin to go naked). If you have a $750 -C in a CC and a $800 -C in a calendar, if you close the $750 -C your broker will likely just reassign the $800 -C to the 100 shares and then your LEAP will no longer be part of a calendar.
--Consolidation rolls. At market prices right now you can roll 3x 750 and 1x 800 to 4x $760. Or, 1x 750 and 3x 800 to 4x $785. Find a combination that aligns with your price outlook, balancing space for underlying to run up with risk of underlying running up too far.
--Split rolls. This is pretty straightforward in a marginal account that has margin available for naked contracts--just split the value of a number of sold contracts at your current strikes across a greater number of sold contracts at higher strikes. To varying degrees this can be can also be achieved by splitting a sold contract into a higher strike sold contract plus some kind of spread.

Sure, Thank you very much.

I rolled 04/09 750C (originally got $2.40 for these) to 04/16 805C for $1.45. Not a great trade, at that expiry (04/16), will act on these in the next day or two.

04/09 750C (originally got $2.00 for these) in another account to 04/09 800C for $3.50 debit, net loss of $1.50.

Left almost all of the 04/09 800C untouched. Closed a few at a small loss.

 

[sub]

I see a lot of people afraid of losing their shares when selling CC. I initially felt the same but since I play it on the safer side (15% OTM) and adjust early, not wait until my calls are ATM then hope, I have near zero worry I'll lose shares. I can adjust out and up to the point my shares would be worth 3-5x what they are worth today and I'd have no problem with them getting called away. TSLA would have to move up faster than it ever has for that to happen as well. Reading everyone else's strategies, it seems more profitable to play it on the safer side and not be adjusting/buying back positions all the time. I started the year with 2405 shares, started selling CC's the 2nd week of January and buying shares with the premium. I now have 2587 shares and the share price hasn't come within $60 of my sold calls before I adjusted out and up. I played it safe after the P/D report, was short 780's for next week going into the report and adjusted them out one week to 805's and picked up a few shares with the credit yesterday morning just after open. I was pretty confident the stock would sell off after the initial pop but I don't take any chances. I'm going to sit tight and make my next adjustment right before or during earnings week. I'll make sure I'm 20% OTM at Market close day of earnings and not worry about it. I think with this plan I can add 20-40% to my position every year, not bad.

 

[bxr140]

I see a lot of people afraid of losing their shares when selling CC.

Yeah--its a weird approach to trading. When one sells a CC against shares one is explicitly making a deal with themselves to let the shares go at a certain price in exchange for a small amount of profit. What seems to happen a lot though is a level of stress about potentially losing those shares because they choose too aggressive strikes in an attempt to squeeze a little more out of the otherwise small amount of profit...

 

[sub]

Yeah--its a weird approach to trading. When one sells a CC against shares one is explicitly making a deal with themselves to let the shares go at a certain price in exchange for a small amount of profit. What seems to happen a lot though is a level of stress about potentially losing those shares because they choose too aggressive strikes in an attempt to squeeze a little more out of the otherwise small amount of profit...

I accept that it "could" happen but I sell CC's in a calculated way to make the chances of that happening extremely small. I also know what number in the next 1-2 years I wouldn't have a problem letting them go for, and I know I can adjust out to that number. I look at the premium from the CC's as icing on the cake, not going to risk the cake for the icing. I think some here are getting too greedy and not realizing it doesn't really pay off more to play strikes closer to the money because of all the adjustments etc that need to be made, better to have smaller premiums expiring nearly every week imo.

 

[Davidzhao365]

This is really a good thread to learn option trading. Want to share some trades I made today.

First trade is I sold 100 contracts for May 7 '21 $620 Put at $23.8.
Second trade is I sold 30 contract for Jan21 '22 $500 Put at $63.6.

Wish me luck! Thanks!

 

[adiggs]

This is really a good thread to learn option trading. Want to share some trades I made today.

First trade is I sold 100 contracts for May 7 '21 $620 Put at $23.8.
Second trade is I sold 30 contract for Jan21 '22 $500 Put at $63.6.

Wish me luck! Thanks!

A big part of the value in the thread is to help us all understand the thought process that leads you to a particular choice(s).

If my math hasn't failed me you're looking at 1 month and 9 month option sales. What was the motivation for those duration / expiration options? What led you to those strikes?