Wiki Selling TSLA Options - Be the House

[Yoona]

Thanks for the update (and to others providing similar condor plans). I particularly like that you've gone through your logic for how you arrived at this choice. This provides me with an incremental bit of information as I evaluate my own condor plans for the week. Not waiting for Thursday this week, eh?

Hahaha. Yesterday, the credit was $16k/100 contracts. Today, it's $10k. On Thursday, it's ...

 

[adiggs]

I've been thinking more about these split, flip, and split-flip rolls that @bxr140 has been talking about. And I think that somewhere in here is a cure for these 760 puts I have that are so deep ITM. I am planning to write about my journey through these things.

First a bit of terminology, as I understand and am using it.
A flip roll is a put to call, or call to put roll. I've done one of these when I flipped a -760p to a -400c last week. To pull this off one needs the backing for the new contract. In my example I needed shares instead of cash, which I accomplished by simultaneously doing an OTM call to put flip.

A split roll is a 1 to many contracts roll, but still the same kind. I.e.. 1 put to 4 puts (example). This will need a bunch of cash to support (1x76k to 4x65k or something like that).

And a split-flip combines the 2. I am today evaluating a -760p to a short call flip while adding some calls to see what is possible.


Today I'm evaluating choices on a split flip and just documenting what is available today, thought not necessarily planning to implement anything. Flipping puts to calls is better for me as I would rather turn shares into cash anyway (should I receive early assignment) and I think the overall bias is down on the shares thus calls are better than puts for finishing OTM.


A flip today takes me from 760p to 400c for a $5 credit. The 410 is too big of a stretch to still get a credit. I'm also adding a week on this from 5/28 to 6/4 (and this deep ITM I'll be rolling by Friday of this week anyway).

If I split flip to a second call then I can go 760p to 2x490c for a $14 net credit (the 500c turns into a net debit).
The split flip to a third call gets me 760p to 3x530c with a $5 net credit ($500).
The split flip to a 4th call gets me 760p to 4x550c with a $5 net credit.
The split flip to a 6th call gets me 760p to 6x575c with a $3 net credit.
The split flip to a 8th call is good for 760p to 8x590c with a $3 net credit.
The split flip to 10 calls is good for 760p to 10x600c with a $3 net credit.
The split flip to 12 calls is good for 760p to 12x605c with a $12 net credit

A couple of observations. If I'm willing to flip into enough calls then I can actually take this very deep ITM put and turn it into OTM calls. These have a 6/4 expiration, or 2 and a half weeks (1 extra week on the 5/28 put expiration that I'll roll by 5/21 anyway). I might need to look at a split flip that brings the expiration closer - like say this week. H'mm....

The second observation is that this is going to be really capital intensive. Capital intensive is a feature, not a bug, for me. But it's not all roses.

To pull this off I'd need to close all of my current covered calls in order to free up coverage for this split flip. I am in the process of doing that for expiration this Friday (-600c).

AND I'll need 600 uncovered shares to split-flip into the 6 calls for 1 put position - hence closing my current covered calls to free up shares to support this maneuver. On the plus side though I'll be freeing up cash covering a 760p to sell puts against. The obvious and certain consequence is that the income I am currently generating from the calls will stop while I'm doing this.

I'm also pretty sure, but not yet certain, that I only have the custom trade ticket that I need to make this trade in my brokerage account; not in my IRAs. I might be able to make this trade in two tickets in the IRAs. That is probably just fine, but I haven't evaluated that.

And for my context, I've already generated 2/3rds of the paycheck replacement income that is my target for the year, in the first 4 months of the year. A few months off to make all of my positions OTM is just ok with me (good even) for risk management purposes.

And the biggest part of the risk here - the shares take off on me. This would have been good for the 760p that I left behind but will be really bad for the many calls I'll be rolling into. Really bad as the move against me will be magnified by the number of calls I flip into.


Out of all of these positions, the particularly high count call positions appeal to me the most, especially if I can get similar results by rolling into weekly expirations. If I can go week to week doing something like this, then I might even be able to "cure" all of these deep ITM puts pretty quickly and get out of this perma-roll that is waiting for a big move up. A big move up that I am increasingly of the belief that we won't see this year.


More to come on this saga. And hopefully a useful view into a way to handle short options that go deeply ITM when you are willing, but prefer not, to take assignment. Kudos to bxr for the ideas!

 

[adiggs]

Hahaha. Yesterday, the credit was $16k/100 contracts. Today, it's $10k. On Thursday, it's ...

Last week on Thursday it was $1.40 or $14k per 100 for me. Pretty sweet deal for a 2 day position I'd say. But how repeatable? That's what I want to be learning. And I'm big on (a) learning by doing and (b) being paid to learn.

I mostly accomplish (b) with small positions that are reflective of the risk/reward I think appropriate to my context. The risk/reward is so I get a correct feel for how these work - small so if I goof it up badly then it won't hurt my long term lifestyle.

 

[llirk]

When you say ”80% profit”, that means you will BTC at $2? If not, what is the formula?

That's correct. As soon as my STO fills, I immediately place a BTC at 80% ($2 in this case). It's a manual GTC order at $2, as I'm not aware of any platform that supports the entering of the BTC as a percent of the original order price.

Given the wide daily swings in price, I find this helpful to cash out at 80% without having to time the trade. I may be leaving some $$ on the table, but when you have a number of trades open at a given time, the GTC helps manage the strategy. I use it on my spreads as well.

 

[adiggs]

A flip today takes me from 760p to 400c for a $5 credit. The 410 is too big of a stretch to still get a credit. I'm also adding a week on this from 5/28 to 6/4 (and this deep ITM I'll be rolling by Friday of this week anyway).

If I split flip to a second call then I can go 760p to 2x490c for a $14 net credit (the 500c turns into a net debit).
The split flip to a third call gets me 760p to 3x530c with a $5 net credit ($500).
The split flip to a 4th call gets me 760p to 4x550c with a $5 net credit.
The split flip to a 6th call gets me 760p to 6x575c with a $3 net credit.
The split flip to a 8th call is good for 760p to 8x590c with a $3 net credit.
The split flip to 10 calls is good for 760p to 10x600c with a $3 net credit.
The split flip to 12 calls is good for 760p to 12x605c with a $12 net credit

Another observation I forgot about. Any of these outcomes that still leaves me far OTM doesn't sound desirable to me. It sounds like transform a position that needs a big move up to fix, into a position that needs a big move down. It sure seems like we're in a narrow trading range right now. That probably won't last but I'd at least like a chance at getting OTM quickly instead of creating a new deep ITM position that I will be rolling indefinitely.

In these examples using todays prices - the 575c is I think the minimum I'd roll into. The 590 or 600 sounds a lot better.

 

[adiggs]

Another observation I forgot about. Any of these outcomes that still leaves me far OTM doesn't sound desirable to me. It sounds like transform a position that needs a big move up to fix, into a position that needs a big move down. It sure seems like we're in a narrow trading range right now. That probably won't last but I'd at least like a chance at getting OTM quickly instead of creating a new deep ITM position that I will be rolling indefinitely.

In these examples using todays prices - the 575c is I think the minimum I'd roll into. The 590 or 600 sounds a lot better.

My decision of the moment is that I'll wait for this Thurday or Friday rolls out to 5/28 (for the weeklies) and decide then about the split-flip idea and what I want to do with it. If I try to buy out the OTM calls today then I'm just rushing things and taking a loss on a position that is likely to finish OTM (-600c for this week expiration).

And besides that will provide me with an opportunity to do a bunch of trade data entry. I'm falling behind and I need that info so I can evaluate May to-date.

 

[CHGolferJim]

That's correct. As soon as my STO fills, I immediately place a BTC at 80% ($2 in this case). It's a manual GTC order at $2, as I'm not aware of any platform that supports the entering of the BTC as a percent of the original order price.

Given the wide daily swings in price, I find this helpful to cash out at 80% without having to time the trade. I may be leaving some $$ on the table, but when you have a number of trades open at a given time, the GTC helps manage the strategy. I use it on my spreads as well.

Thanks. Why do you choose 80% instead of 90%?

 

[llirk]

Thanks. Why do you choose 80% instead of 90%?

My experience has been that 80% limit can fire several days prior to expiration on a big move where 90% limit typical occurs day of or day prior. I believe it was @adiggs that said to close out rather than tempting fate. We all know a Friday reversal can quickly put you on the other side of the trade.

That said, if it's obvious it won't finish ITM, I cancel the GTC.

 

[CHGolferJim]

My experience has been that 80% limit can fire several days prior to expiration on a big move where 90% limit typical occurs day of or day prior. I believe it was @adiggs that said to close out rather than tempting fate. We all know a Friday reversal can quickly put you on the other side of the trade.

That said, if it's obvious it won't finish ITM, I cancel the GTC.

Plus, if you’re going to roll to the following week, being earlier with the 80% BTC probably results in a higher premium that covers most of the 10% difference.

 

[Criscmt]

@adiggs @asburgers @bxr140 @dl003 @Lycanthrope @ReddyLeaf @setipoo @buttershrimp and others, Are you guys working in another full-time job, you know, the usual 8-5ish job? How much of time are these trades taking up in your mind, during your job, family time etc? Do any of you have kids at home? Just the amount of posts, the analysis I see from some of you should be taking significant time, at least a couple of hours a day.
I am noticing significant mental energy going into this. I am not saying it's not worth it, especially when the trades are bringing in significant income.

 

[Puff]

That's correct. As soon as my STO fills, I immediately place a BTC at 80% ($2 in this case). It's a manual GTC order at $2, as I'm not aware of any platform that supports the entering of the BTC as a percent of the original order price.

Given the wide daily swings in price, I find this helpful to cash out at 80% without having to time the trade. I may be leaving some $$ on the table, but when you have a number of trades open at a given time, the GTC helps manage the strategy. I use it on my spreads as well.

Tastyworks does this. BTC as a percentage

 

[tradenewbie]

Another observation I forgot about. Any of these outcomes that still leaves me far OTM doesn't sound desirable to me. It sounds like transform a position that needs a big move up to fix, into a position that needs a big move down. It sure seems like we're in a narrow trading range right now. That probably won't last but I'd at least like a chance at getting OTM quickly instead of creating a new deep ITM position that I will be rolling indefinitely.

In these examples using todays prices - the 575c is I think the minimum I'd roll into. The 590 or 600 sounds a lot better.

I am a newbie who just started practicing sell puts, the first 2 times were successful (only sell 1 put at a time). Last Monday I started getting greedy and thought 150MA would be a strong support so I sold 3 X 640 puts and eventually all the drop starts. I was thinking it would get better soon and reluctant to buy it back to cover loss, then eventually its running out of control....Now I have to spend way much more effort to overcome this situation while not making money.

Not a pleasant experience for a greedy newbie like me, big lesson learned.

last week:
STO 640 X 3 sp: +$88 premium totally

yesterday:
BTC 640 sp - $60 X 2 = -$120
STO 605 sc - 8.6 X 6 (Currently I have 6 contracts) = +$51.6

So after all this drama, only made $19.6, and I still have 1 more 640sp (next friday expiry) and risk of 605sc (this friday expiry)

 

[Chenkers]

I’m interested to see what that looks like for the rest of the week, but it looks like some serious bets on massive P/D numbers for Q2.

Bullish, however P/D number won't be out until around the 2nd of July so June 18th is a little early for a deliveries bounce.

 

[Chenkers]

@adiggs @asburgers @bxr140 @dl003 @Lycanthrope @ReddyLeaf @setipoo @buttershrimp and others, Are you guys working in another full-time job, you know, the usual 8-5ish job? How much of time are these trades taking up in your mind, during your job, family time etc? Do any of you have kids at home? Just the amount of posts, the analysis I see from some of you should be taking significant time, at least a couple of hours a day.
I am noticing significant mental energy going into this. I am not saying it's not worth it, especially when the trades are bringing in significant income.

I have a demanding full time job and family so for me TSLA is effectively like working a second job. With my time zone trading occurs through the night so I'm working on that through the later evening into the early hours. I keep up with reading, videos etc when I can through the day and survive on whatever sleep I can manage. At some point I'll feel ready to let the day job go and happily continue trading TSLA and enjoying whatever else I want to do with my time.

 

[jeewee3000]

I have a daytime job and a family but I've got two advantages:

1. Time zone difference means TSLA trades 15:30 to 22:00 my time, so the first part of my day I get the most done and try not to think about TSLA.
2. 80% of the time I work in front of a PC therefore I can follow along loosely and make a trade if necessary/opportunity presents itself.

Huge timesaver for me also, and maybe a general tip for beginners, is the price alerts. I use the Webull app for this (Yahoo finance app was't reliable) and after selling options I set an alert for when the SP zooms past a point close to ATM so I can evaluate if I want to roll or so). Really helps me take my mind of the ticker for longer periods of time.

 

[juanmedina]

At this SP I don't think I feel confortable selling CC's anymore. I am not willing to loose my shares at this prices the SP can turn around in a second.

 

[Yoona]

Make sure to double-check that you sold, not bought. Accidentally made that mistake before and received debit instead of credit.

I am waiting for the SP reaction to the Biden speech this afternoon. If no change, my IC range will probably be 550-650.

550 is due to
- yesterday's 561 low
- today's premarket 566 low
- this morning's 563 low
That's 3 failed attempts to reach 560.

650 is due to the 640 max pain and 650 call wall.

Hope it works!

the 4th attempt to breach 560 finally happened : low 545 at premarket

my IC is probably 530-610, to be decided this afternoon or tomorrow

this reinforces again my previous learnings... Mon/Tue is too early to tell range

 

[ZeApelido]

I can't help it I've keep selling an additional OTM long dated put every time the stock drops significantly.

Now I have 5 sold contracts.

 

[jeewee3000]

I can't help it I've keep selling an additional OTM long dated put every time the stock drops significantly.

Now I have 5 sold contracts.

Care to share the strike prices of those puts?

 

[ZeApelido]

2 @ 590 strike, 2 @500, 1 @500. Various expiries 6 months to 1 year.

I don't plan to hold until expiration but famous last words.