Obvious now that you say it. Thanks it clarifies things for me!
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
I bought 14x 6/11 c630s for $2.20 during the MMD. Not perfectly timed, but pretty close. Really love today’s action and hopeful about tomorrow. I might sell some cc702.50s or cc755s if the action looks good on Thursday, but it’s probably just too risky.
A 20% up week would be awesome. I end up selling 6x cc652.5s at $2.15. I bought a Jun 2023 1300/1000 call debit spread but that's it, I am cash poor.
Isn’t rebalancing at end of month, not this week?
The premiums were pretty good even for $550 when SP was near $585. Was it calculated risk to go for 57/580, or did you pick the strikes later in the day when SP was rising?
More study is needed as always, but no unicorn hunting here…. Just trying to learn how to use all parts of the Buffalo at different times without actually killing or possessing the Buffalo.In no particular order:
1. A conversion requires you to own shares (so you need that capital tied up in shares and you very much have to be willing to let the shares be called away)
2. A reverse conversion requires you to short shares (so you'll need capital/margin tied up in the short shares)
3. The options legs of a conversion/RC form nearly the opposite P/L curve as the underlying shares/shorts, so the end profit for the whole position is just the small difference between the price of the put vs its equivalent call, as that is the thing that makes up the difference between "nearly" and "exactly".
4. If you're looking to modify the P/L of the options combo via different strikes/expirys you a) will require more margin and/or more initial capital, and b) the less the P/L of the options will move like shares (so you'll be exposed to P/L from underlying movement)
In general, I'd recommend not trying to find a unicorn.
When you say it requires me to short shares, I don’t understand what you mean here. Maybe I’m confusing the term? You just mean that I’m not in possession of the shares but I still have to promise to buy them correct?
separate question- it seems making money day trading on days like today is easy. Do you ever make money day trading Tesla on down days? Curious. That would be a party trick I’d like to learn.
Excellent.
Definitely, someone looking to trade options should spend time understanding all the elements and how to use them. What that means is understanding terminologies, the greeks, the way an option gains or loses value, etc. Once one has an understanding of those elements, applying logic to various strategies (like conversions, synthetics, etc) is the easy part.
So playing off the analogy, this conversation about conversions is actually equivalent to contemplating the best way to prepare the buffalo's ribs, whether to dry rub or sauce them, whether to sear them or go straight to low heat, etc.
To play another analogy, I appreciate that an eager and optimistic healer might want to get their residency started ASAP...but its probably a good idea if they took a few pre-med classes first...
Shorting shares is exactly the opposite of buying shares. When you buy a share you buy at current price to open the position and (obviously) you want the price to go up so you can sell the share at that higher price to close the position. When you short a sale you sell a share at the current price to open the position with the expectation that price will go down, then you buy back the share to close the position at the lower price.
In both cases the goal is "buy low sell high", its just that shorting is doing it in reverse. In the case of the shorts you do the sale on margin, and so you need to manage that margin relative to underlying price.
I don't have time to day trade these days, but when I do I always trade futures, usually ES or GC (or if I'm feeling wimpy, MES/MGC), and very occasionally FV or US.. I never day trade securities and definitely not TSLA, because it doesn't really adhere to common technical analysis and so it really just relies on gambling/gut feel.
Man you are going to do great on those options, great call. I am terrible at short term calls and that's why avoid them. I lost 50k recently
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jeewee3000
Active Member
Hi all, I've been out of the loop for the last few days (since last thursday). Read up a bit on this thread and the main thread and I have to ask: why are we so bullish this week?
Plaid event? China numbers that came out this morning? Can't see why these catalysts should pop us over 700 as some seem to imply.
Plaid event? China numbers that came out this morning? Can't see why these catalysts should pop us over 700 as some seem to imply.
BTO 6/11 - $640 calls at $1.80 each - missed getting them at $1.50 but still happy for this yolo
Man you are going to do great on those options, great call. I am terrible at short term calls and that's why avoid them. I lost 50k recently
Don't feel at all ashamed. It is a lesson learned. Trust me, if I have proven anything, it is that in trading there's a lot of lessons learned.
Short dated longs held for any period of time are all but a pure gamble. Lots of inexperienced traders get sucked into the hopes and dreams of loading up on a bunch of really cheap, close dated calls very much in the way people play red and black at the roulette wheel. The analysis is light on logic or strategy and heavy on aspiration and ambition, and is rooted in a very weird mentality of "I'm ok losing it all".
I've beat this horse plenty of times already, but the only way someone should be buying short dated calls, and especially this week's calls, is if they're day trading on the order of minutes...MAYBE a few hours. And in those situations the position is still based on serious analysis, performed by serious traders that aren't going to be hanging out in some backwoods thread on a car forum like us trading hacks.
Indeed - the YOLO is a pure gamble.Don't feel at all ashamed. It is a lesson learned. Trust me, if I have proven anything, it is that in trading there's a lot of lessons learned.
Short dated longs held for any period of time are all but a pure gamble. Lots of inexperienced traders get sucked into the hopes and dreams of loading up on a bunch of really cheap, close dated calls very much in the way people play red and black at the roulette wheel. The analysis is light on logic or strategy and heavy on aspiration and ambition, and is rooted in a very weird mentality of "I'm ok losing it all".
I've beat this horse plenty of times already, but the only way someone should be buying short dated calls, and especially this week's calls, is if they're day trading on the order of minutes...MAYBE a few hours. And in those situations the position is still based on serious analysis, performed by serious traders that aren't going to be hanging out in some backwoods thread on a car forum like us trading hacks.
Oh, I’ve never been so unfortunate to read a reply to my message after the trading day! Case and point, day trading Tesla stock SUCKS!
I made 10k just day trading on Monday only to lose 16k today. Yuck! I have no business day trading any stock let alone TSLA. My day is too busy and it’s far too easy to be wrong but it was valuable lesson nevertheless. Swing trading perhaps is something I could do with time and education but even that is problematic and too dangerous before I really understand position sizing and separating trading and investing stashes etc.
Even so, I’ve learned some things…
1) don’t buy premarket, and if you do, don’t get lackadaisical with stop loss just because it’s premarket
2) it’s best to enter stock at MMD if it “looks right” which means NDX s&P mini are climbing steadily upward as well, no FUD, good treasury rates.
3) if daytrading, pay attention to slope of 20 day moving average, buy at bottom of bollinger and if TSLA is oscillating between the upper and lower bands similar to NDX.
4) move stop loss up as soon as there is a profit , exiting the trade automatically when the price reverses.
5) beware of low volumes,
7) and finally don’t do it…. Don’t day trade TSLA … you will lose…. And if you are going to do it anyway, really be sure prices are trending upward and be prepared to be wrong more than 1/3rd of the time.
On a separate note, I really do like the reverse conversion. It certainly has a time and place if you can do execute it gracefully at the right time. I LOVE selling puts, it feels like something I could become decent at. I HATE the buying calls aspect of the reverse conversion and there has to be a better way than what I’ve done. Still, I did some things well this week.
For example, I entered synthetic this week only because I had rolled my put position from previous week, AND 2) stock dropped a lot on Monday allowing me to purchase 25x 602.5 calls for relatively low premium. I was looking for a better way to hedge the upside this week with my rolled puts.
As a result of this position, I discovered (on accident) the fantastic margin requirements of the reverse conversion (10% margin in reserve for each 100 shares) which allows more leverage to do a few not so smart things like daytrade TSLA on a down day. No need to point out that this isn’t wise.
So bxr. I appreciate your analogy about medicine. All I can say is some people learn best by learning the terminology after they have intuitive understanding of the concept. Not ideal in any sense, but I’ve learned a lot in my life, but options is much more like fly fishing than medicine. There is real science beneath fly fishing but it’s still too complex and messy to do good double blind studies on what strategy catches more fish. Still, with time, you develop an understanding of water temp, tides, wind, various types of synthetic fishing line for the right situation (no pun intended). For me…. I need to experience first hand each aspect to understand it fully. Terminology is just a way of explaining the concept after I’ve experienced it. I’m getting there…. Just takes time.
So when I say using all parts of the Buffalo…. I’m talking about finding a practical way to make the most of a decent rolled put position expiring this week and I seized an opportunity to purchase weekly calls. An opportunistic synthetic. Do I like it? Maybe. I am hoping you might tell me if there would be ANY adaptation to what I’ve mentioned with a decent rolled put position expiring Friday. All things being equal, the only thing I might do differently is buy longer dated calls. The duration of the long calls is what doesn’t sit right with me… and I’m wondering is there a better way to play this situation?
Thanks again for your help!
alterac000
Member
Hi, I haven't checked in for a while due to work but I'm back now.
Knowing others are much more knowledgeable than me, here is what I would share.
The best thing about cc's is that you can always roll to either give yourself more time, a higher strike, or both for a neutral cost or preferably credit. You can also do debit rolls but as many have suggested this is probably not a great recurring strategy over many trades.
I was in a similar spot as you with much lower strikes a couple weeks ago when I posted my May 28 cc's, most of which were under water. At the time I ended up rolling 2 weeks out to 6/11 out of necessity due to work, and given the recent price action will probably close several out over the next 24 hours. Like you, I could have at the time closed the underwater cc's for a debit, but instead rolled for small credits which bought some time and slightly better (higher) strikes, giving some flexibility to see if a better exit presented itself. Fortunately it has and I've avoided losing significant cash with debit buy backs. The hazard of this naturally is the sp could have had a massive run up, and I may have landed in 'roll forever' mode. Like some have stated however, I'm personally of the belief we are not going to have a repeat 2020 with TSLA, at least not soon, so my fear of the forever rolling problem is not really significant now. I would be *glad* to be wrong on this even as soon as 6/10
I think it's safe to say we should not try to time the market, and instead find the best opportunities we can along the way to trade, accepting that sometimes we will be wrong. I believe part of what you are learning is how you personally react to the fluctuations in sp and option prices. I've been through this too and have finally learned to use a combination of short term directional conviction, option greeks especially delta - still learning the others, and lot sizes to better handle my emotional responses and hedge against my mistakes...in hopes of making better decisions along the way.
are you guys still waiting to sell CC's? this price action is demoralizing . I sold a few more $652.5 in the morning for pennies.
. I sold a few more $652.5 in the morning for pennies.
Still wrestling with how to reflect cost basis in my CC strategy in IRAs, since I didn't understand late-term BTC until a few months ago and let shares assign then repurchased taking profits and raising the basis. A new tactic in recent weeks is to buy incremental shares Thu-Mon and STO at purchase price for the bulk of the week's income, expecting those shares to be assigned. This better protects my core shares, especially with this Thu's event, so I did STO this morning for 6/11/21 for the incremental shares and 40% of core shares. I expect to protect the 645/650 through BTC late Thursday, if needed, although with this week's trading and Max Pain at $600, I may have been too cautious and have little to worry about, we'll see. Showing ~35% profit through today's close.are you guys still waiting to sell CC's? this price action is demoralizing
- $610 at $7.85
- $645 at $1.01
- $650 at $0.72
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