Wiki Selling TSLA Options - Be the House

[stealthyc]

Anyway - some experiences this year (Feb to now):
I've had short puts go $150 ITM. That position is still alive, rolling for a small strike improvement and credit, even when $150 ITM. It's also about 2-3 months old and hasn't generated meaningful income for most of that time. And it got there first by generating income on the share run up to $900 (when it generated a lot of income; it's worked out). It's down to a $770 strike (from $820 or so) and has been generating small credits each time I roll it. At $150 ITM I had to roll 2 weeks at a time to get movement. I've also rolled 4 weeks at a time as I view the purpose of a DITM roll being to buy time. The strike improvement and minor credit are secondary consideration with strike improvement being most important (these are my 'rules' - you might develop different 'rules').

I'd say that DITM starts around $50 to 70 ITM these days. Pretty sure that as IV goes down, the ITM number will get closer and closer to the share price.

And it looks like I'm going to have some ~$30 ITM positions to roll this week - I haven't had experience that far ITM to see strike improvement / credit. I'll have a better idea later in the week at this closer level and I'll post those position rolls when I do them.

I am typically not very aggressive with my strikes on sold puts, but sometimes the price moves a lot, and as such I also had some 730p that I rolled through the drop into the $500s over the last months, finally closing them out on Friday. I never tried to improve the strike, as I had confidence in the underlying price improving. Despite going $150 ITM I was able to find moments of high IV and on average was able to roll them for $8 premium each during the 8 weeks I held them, but the low was around $4 as I recall. So basically an average of 1% return every week over that large drop. (I also sold more at much lower strikes after the drop for better premium) It is the first time the stock price moved that far against me.

I will wait and see this week. Hopefully the market will digest the earnings over the next couple of days and by Friday I will likely enter into another position for next week. I've generated enough cash to add 275 shares to my long term holdings over the past 3 months, so I've been generally pleased with my results, .

 

[corduroy]

I'm expecting this dip to turn around quickly, so my plan is to sell a couple puts on the open today and if we swing to green this afternoon, sell some calls.

 

[juanmedina]

April 30th calls and puts got crushed . IV crush is a real thing. I guess from now on I will sell calls before earning no matter what.. even if they are crazy OTM. IV 52.8

 

[buttershrimp]

I didn't see if this was mentioned, but 400 shares can back 4 covered calls. To cover puts you would need the cash that the 400 shares costs. At $700 / share the 400 shares are $280k. That $280k is the backing for the puts

yes that’s what I meant... I meant since I bought the shares yesterday rather than selling for small gain and immediately selling puts ... just trying to say I had earmarked those shares to be in cash and didn’t know if people on this thread would be keeping 1/4 of their cash (in my case, shares today) for selling puts each week... 1/4 puts and 3/4 cc?

 

[dmvevguy]

April 30th calls and puts got crushed . IV crush is a real thing. I guess from now on I will sell calls before earning no matter what.. even if they are crazy OTM. IV 52.8

Hmm, I just learned that lesson today as well! I'm still considering wine+dinner money for this week for my family. April 30 800 calls are about $65. lol.

 

[Chenkers]

April 30th calls and puts got crushed . IV crush is a real thing. I guess from now on I will sell calls before earning no matter what.. even if they are crazy OTM. IV 52.8

Down from 86 yesterday certainly constitues a crush. I'm kicking myself for not selling 850CC for $2.50, now a tenth of that.

 

[pz1975]

April 30th calls and puts got crushed . IV crush is a real thing. I guess from now on I will sell calls before earning no matter what.. even if they are crazy OTM. IV 52.8

I’ve been doing this for years now - selling way OTM calls and puts before earnings reports. I think once (maybe twice max) in probably 24 quarters of doing this have I had to roll one side of the trade. There is always an IV crush the next day.

 

[adiggs]

yes that’s what I meant... I meant since I bought the shares yesterday rather than selling for small gain and immediately selling puts ... just trying to say I had earmarked those shares to be in cash and didn’t know if people on this thread would be keeping 1/4 of their cash (in my case, shares today) for selling puts each week... 1/4 puts and 3/4 cc?

Ah hah! I understand now.

My context might be very different - a focus on income and stability in retirement; my target is 50/50 with a bias towards more puts than calls. In my brokerage account which provides living expenses I would prefer something closer to 40/60 (i.e. 1.5 puts per 1 covered call). That leaves quite a bit of cash that is reasonably quickly available for large purchase will still having a good chance that the large purchase doesn't shift to worse than a 50/50 split.

The 50/50 split is completely new to me as of a year ago when I started holding a lot more cash than I have over this last decade (roughly none). Just as my living situation is also completely new to me as of a couple of months ago

 

[buttershrimp]

I’m hoping Gary Black is right that afternoon SP will recover and surge

 

[juanmedina]

Down from 86 yesterday certainly constitues a crush. I'm kicking myself for not selling 850CC for $2.50, now a tenth of that.

Oh well lesson learned. I wonder for how many days IV will keep trending down. I am afraid that selling options will not be profitable for a couple of weeks unless the stock moves hard.

 

[sub]

I’ve been doing this for years now - selling way OTM calls and puts before earnings reports. I think once (maybe twice max) in probably 24 quarters of doing this have I had to roll one side of the trade. There is always an IV crush the next day.

Agree on this. I use to be terrified to sell calls on earnings but with the IV crush the next day you have to at least sell some really far OTM options. The chances of those going in the money before market open the next morning when you can adjust if necessary is darn near zero. The nice thing is it's not just this weeks options that get crushed, I adjusted to 3 weeks out just before market close yesterday and those were crushed as well.

 

[Yoona]

I’ve been doing this for years now - selling way OTM calls and puts before earnings reports. I think once (maybe twice max) in probably 24 quarters of doing this have I had to roll one side of the trade. There is always an IV crush the next day.

thanks for this gold nugget... something to add to my strategy playbook

 

[Yoona]

For Apr 30:

Sold Bull Put Spread +p660/-p690
Sold CC 800

 

[Tslynk67]

I’m hoping Gary Black is right that afternoon SP will recover and surge

Hey, link the Tweet, why don't ya'!

 

[bxr140]

I guess I don't know what deep in the money is for a weekly. I assumed 5-10 dollars above strike is DITM... but probably not.

There's no official line for DITM vs ITM vs ATM, but generally ATM is the couple strikes around current underlying price (within a few percent), ITM is maybe 6-8% (it also depends a bit on the underlying price), and DITM is beyond that.

Regardless, it goes back to understanding how the position makes profit. A sold put inefficiently burns off value as underlying price goes up, AND it requires a lot of capital/margin to enter, so its really not a good choice if you're looking to capitalize on underlying profit movement.

A DITM option (on either side) NEEDS underlying reversal--it NEEDS price to come back to it, and for that pleasure you've basically given up control over a large amount of capital and are making little or no revenue on that large amount of capital while you wait for price to return. While some folks are ok with the "hope real hard" trading strategy, I am not.

 

[bxr140]

I’ve been doing this for years now - selling way OTM calls and puts before earnings reports. I think once (maybe twice max) in probably 24 quarters of doing this have I had to roll one side of the trade. There is always an IV crush the next day.

DOTM is definitely the way to do it against core shares that you're not planning to unload either way.

FTR, while its probably low value to semantics the word "crush", IV30 dropped ~13% (or ~8 percentage points) since yesterday close. While not insignificant, that's one of the lowest drops in past two years at least.

 

[sub]

There's no official line for DITM vs ITM vs ATM, but generally ATM is the couple strikes around current underlying price (within a few percent), ITM is maybe 6-8% (it also depends a bit on the underlying price), and DITM is beyond that.

Regardless, it goes back to understanding how the position makes profit. A sold put inefficiently burns off value as underlying price goes up, AND it requires a lot of capital/margin to enter, so its really not a good choice if you're looking to capitalize on underlying profit movement.

A DITM option (on either side) NEEDS underlying reversal--it NEEDS price to come back to it, and for that pleasure you've basically given up control over a large amount of capital and are making little or no revenue on that large amount of capital while you wait for price to return. While some folks are ok with the "hope real hard" trading strategy, I am not.

selling that DITM put is the exact same position as owning shares and selling the same strike covered call as the put. I know you know this, just pointing it out to others.

 

[buttershrimp]

Hey, link the Tweet, why don't ya'!

good point will remember next time

 

[alterac000]

For Apr 30:

Sold Bull Put Spread +p660/-p690
Sold CC 800

I like this. I took a little more risk and sold p700 and cc800

 

[buttershrimp]

There's no official line for DITM vs ITM vs ATM, but generally ATM is the couple strikes around current underlying price (within a few percent), ITM is maybe 6-8% (it also depends a bit on the underlying price), and DITM is beyond that.

Regardless, it goes back to understanding how the position makes profit. A sold put inefficiently burns off value as underlying price goes up, AND it requires a lot of capital/margin to enter, so its really not a good choice if you're looking to capitalize on underlying profit movement.

A DITM option (on either side) NEEDS underlying reversal--it NEEDS price to come back to it, and for that pleasure you've basically given up control over a large amount of capital and are making little or no revenue on that large amount of capital while you wait for price to return. While some folks are ok with the "hope real hard" trading strategy, I am not.

I totally see what you are saying... and yes, I would only do this strategy of ATM puts (apparently I wasn't DITM at all, but was wanting to sell ATM put because I was predicting (but not counting on) an underlying reversal by end of week. It worked last week, but I held off doing this yesterday. In both instances, getting assigned wasn't the worry. I just wanted to try to earn premium on week I'm predicting a reversal by the end of the week (last week and this week). I would have judged yesterday's move (had I done it) based on whether I generated any profit on the move at expiration. Below beakeven SP = bad move.... anything above that.... good move. Low bar I know. Anything I should be thinking instead?