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Wiki Selling TSLA Options - Be the House

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As described in the quote it sounded like you basically 'froze' the September long P/L with a very tight vertical spread. That's definitely the most conservative way to protect profit without STC'ing the contracts, but FWIW at that point I'd prefer to just close out [at least some of] the position.

Keeping the +C's open, yea something like a 1-3week -C will pay off quite a bit more than the vertical. You can also keep its strike close to the money to maximize Vega and better adjust relative to underlying movement. If you want slightly less management 4-6 weeks out will work too. I don't like selling any farther than that because it really locks you into the position, reduces your maintenance flexibility, and reduces your return on capital.
> but FWIW at that point I'd prefer to just close out [at least some of] the position
Do you mind elaborating why closing (STC) at least some?

> Keeping the +C's open, yea something like a 1-3week -C will pay off quite a bit more than the vertical. You can also keep its strike close to the money to maximize Vega and better adjust relative to underlying movement.
Are you saying, for the covered calls (-C) sold against these long calls, keeping the strike At The Money or close to ATM helps maximize Vega?

> If you want slightly less management 4-6 weeks out will work too.
I generally prefer to execute steps at least a day or two before the D-day. Given the earnings is just 3 market days away, I am considering "executing", likely tomorrow, at least against a major part of my long calls.
I tend to pick a price point where I should act, and setup an order for the execution. I am considering 780 as a strong resistance this week, since waiting till last day (Monday) might be risky my plan is to setup order to sell Jun-18-2021 900C at least against 70% of my Sep-2021 long calls. When SP reaches $779, Jun-18-2021 likely will be priced $34+. With the $34 collected, I will buy shares (@779).

Here's my math, let's say
  1. The SP goes only upward from now till Jun-18-2021, and all the way to $1100 by then, I will have to pony up $166*100 per call. But then my long calls will be $607 (as against their price $278 today). The total number of shares I will have taking through this path is more than the shares I would be able to buy if I "cash out" my long calls and buy the shares.
  2. The SP goes up, but at some point due to combination of SP & Theta, I get an opportunity to roll them for a decent credit, I will do that.
 
Same. I’ve been watching it all day and once it looked like stock price was going to start moving and not retrace, I closed my 40 x $805 calls (STO at $1.95 and BTC at $.39) and may look to resell assuming we get a sustained pop. I’ve been expecting one all week.
I just re-sold my 40 x $805 -Cs at $1.24, as there was a nice pop at the open. If you can't beat the MMs, might as well join them (albeit still conservatively).
 
How many contracts are consider a call wall?
I think it definitely varies week by week - how many puts have been sold and where are they as opposed to the calls. Last week, there were an inordinate number of calls sold at $800, so it was clear those weren't going to be breached. This week there is less of a giant wall, but Max Pain appears to be $720 and you can see there are walls of calls at $750 and $800. I think @Lycanthrope and @bkp_duke are likely safe at $750 but I'm working with a taxable account and am more cautious (I don't want to get called). I'm more comfortable selling puts, as I don't mind the "penalty" of adding more shares, but I'll opportunistically sell calls when I have a decent comfort level that the shares are safe.

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What's the theory on the "call walls"? MM's are hedging and would liquidate their positions at that number to stay delta neutral?
My theory, which may or not be correct, is that the MMs are going to protect those call walls by driving down the price each time the stock price (short-selling, actually selling, placing big sell orders and then pulling them, etc.) gets close to the call wall. Their main goal is to get the calls to expire worthless. This week we have walls at $750 and $800. I'm too chicken to play the $750, but there is still money to be made at higher strikes. Personally, I like to take a position behind the second call wall and let the MMs defend the position for me. I'll roll out if necessary, but my bets have been pretty safe to date. I'll also close them early and look to re-sell or roll down, when appropriate. You can be pretty risk-averse and still skim some premiums.
 
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I read the first 15 pages of this thread for the last hour. Very interesting read.


It's basically @adiggs and @Lycanthrope sharing strategies whilst others try and dip their toes in the same pool.🙃 Thanks for your contributions, everyone. This thread is hugely educational.
I did the same thing. Not only that, I copy/paste/print the gems into a nice binder of handy tips/tricks/wisdom/not-advice.

As i gain more experience and refer back to my notes aka bible, they all start to make sense: "Aha, so that's what he meant by checking delta first, or have the attitude of learning, or make sure to manage risk when planning the trade, or have discipline and be patient..."

Still a newbie!
 
My theory, which may or not be correct, is that the MMs are going to protect those call walls by driving down the price each time the stock price (short-selling, actually selling, placing big sell orders and then pulling them, etc.) gets close to the call wall. Their main goal is to get the calls to expire worthless. This week we have walls at $750 and $800. I'm too chicken to play the $750, but there is still money to be made at higher strikes. Personally, I like to take a position behind the second call wall and let the MMs defend the position for me. I'll roll out if necessary, but my bets have been pretty safe to date. I'll also close them early and look to re-sell or roll down, when appropriate. You can be pretty risk-averse and still skim some premiums.
So Max Pain theory. Anyone run the numbers on this to see if it holds up?
 
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Do you mind elaborating why closing (STC) at least some?

When you created the very close vertical you all but froze the P/L of your [previous] long position, because all the greek movements from both side of the vertical will essentially cancel out each other. I suppose one could imagine some unique situations where that kind of position may be beneficial--for instance, if you want to push the longs over the long term tax threshold (I'd have to noodle on that more to decide if the STG from the shorts largely offsets the LTGs)--but it generally doesn't seem to benefit you as you've ended up with a position that no longer generates profit while at the same time locks up some of your capital that you could be using in other positions.

So instead of selling the calls to back into the vertical, I'd prefer to just sell the longs to lock in their profit. If I were still bullish on the underlying I'd keep some of the longs, which of course exposes their profit to drawdown but also keeps reward on my bullish outlook alive. (FWIW I'd actually roll to slightly OTM strikes to get on the "good side" of The Greeks)

Are you saying, for the covered calls (-C) sold against these long calls, keeping the strike At The Money or close to ATM helps maximize Vega?

The whole point of selling an option is to sell volatility; the Vega bubble 'peaks' ATM, which is why the extrinsic value bubble also peaks ATM. So...at least from a theoretical perspective selling ATM allows you to collect maximum profit from the sale of volatility. Obviously there's more to go into it, primarily the probability of underlying price movement, and so maybe a more accurate statement would be that the theoretical best strike is the one that's ATM at expiration.

Ether way, the real point was that creating a calendar spread instead of a vertical spread allows a trader better flexibility on strike (and expiry) choice on the short, which provides more levers in the game of balancing downside management on the long contracts with upside profit from sale of the short contracts.
 
I read the first 15 pages of this thread for the last hour. Very interesting read.


It's basically @adiggs and @Lycanthrope sharing strategies whilst others try and dip their toes in the same pool.🙃 Thanks for your contributions, everyone. This thread is hugely educational.
In fairness the contributors evolve over the pages. I for instance haven't been contributing much the last month or two (since roughly when I retired .. hmmm...).

In my case this is partly a consequence of me moving from ~weekly contracts to every other week contracts.


But the larger point stands and is exactly what I hope we're all here looking for - education - and what I hope we're all trying to contribute. It isn't just the positions we're taking - its why we're taking them, what we're seeing, what other positions were considered and discarded; that sort of thing. Oh - and how they worked out and what we've learned from our own choices (good and bad - it can be hard to talk about the choices that, in retrospect and using what you knew then, didn't work out as you'd hoped).

I know that I've gotten a lot of this thread and I too appreciate all of the contributors.
 
This thread and investment concept is the single most amazing thing I’ve read on this forum.

Bit pedantic, and probably bit eye roll inducing from the regulars here, selling options as described in this thread and in general (via The Wheel and other strategies):

--Is trading, not investing. Short term, not long term. It may sound like semantics but it is (at least IMHO) really important to mentally separate the two.
--Is far from pinned to the right side of the shitty<-->amazing spectrum. It is generally an approach that has modest returns (that are capped) for high risk (theoretically huge/unlimited risk, but practically closer to just "high") and pretty heavy trader involvement (lots of rolling, lots of fingernail biting, etc.).
 
So Max Pain theory. Anyone run the numbers on this to see if it holds up?
In theory Max Pain comes into play for me because I'm studying the open interest chart, but I'm really looking to see where call walls exist to then set up shop right next to them. For example, Max Pain is supposedly $720 this week. I'm not looking anywhere near there and do not expect we'll finish there. I think it's much more likely we'll finish right below $750. However, there's no guarantee that $750 won't be breached if volume were to really pick up, so I've parked myself behind the $800 call wall for added comfort (albeit with less premium). For me, it's a balance of limiting risk (but recognizing that nothing is risk-free) and being happy with decent, but not huge, premiums.
 
It's my first week on the wheel!
Bit pedantic, and probably bit eye roll inducing from the regulars here, selling options as described in this thread and in general (via The Wheel and other strategies):

--Is trading, not investing. Short term, not long term. It may sound like semantics but it is (at least IMHO) really important to mentally separate the two.
--Is far from pinned to the right side of the shitty<-->amazing spectrum. It is generally an approach that has modest returns (that are capped) for high risk (theoretically huge/unlimited risk, but practically closer to just "high") and pretty heavy trader involvement (lots of rolling, lots of fingernail biting, etc.).
Your post is well timed.... right as Biden dropped his cap gains comments. This is my first week on the wheel, some safe covered calls at 810 for about 1000 bucks profit, and yesterday, placed DITM put (4x750cp placed when stock was at 730 SP). I'm fine buying at whatever, but was going to be super stoked if my first week on the wheel started off with $11,000 gain. Will see how much this puppy bottoms out.