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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
If early in week - 70%. If later in week and don't have a target position for the next week - 90%. If I'm happy with price action to next week, then similar to @Lycanthrope don't pay as much attention to target gain and instead looking for a good spread on the roll.
Update on my positions:
- Currently at 15% of core positions in LEAPs with strikes ranging 700-900c 06/2023; I'm happy with that ratio currently, though will rotate to more LEAPs if we re-visit the low-mid 500s;
- Have now unwound 15% of my sold leaps (recall: I sold leaps against core shares as margin call settlement through these last few months of volatility); the unwinds were all at small gains;
- My sold calls positions against core shares are now:
- 85% 850c 06/2023 - looking to continue unwinding these as price action stabilizes and as I build up more maintenance excess;
- 15% 640c 06/18/2021 - STO at $4; these were 630c last week that I closed at 93% gain prior to opening 640c
- Also initiated a call spread against my purchased LEAPs for a few more pennies - sold 860c 07/2021 at 1.5
Not sure I'd want to be selling 2023 850's! I mean it's an OK cash-out price, but the shares are tied-up for a long time. I guess you'll keep rolling them up if necessary?
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Those are the bi-product of nasty margin calls. Sold the calls to raise cash to cover margin requirement.
I've been rolling margin sold 850/840p since February-March. The recent pull back, compounded by a change in margin requirement percentages going from 30 to 50% on TSLA, left me needing to settle margin calls. Rather than cut down on my share exposure, I converted shares to purchased leaps, and sold leaps (started at 1300c) against my remaining shares, and started rolling those down to lower strikes to settle more margin calls.
The current batch of 850c are what is left and I will be unwinding them (meaning paying back the cash raised- target at same price I sold them at or ideally at a small gain) as my maintenance excess frees up. The other way to unwind them is to roll them back up the chain 06/2023, but having done the math, I could more likely clip more weekly premium (with more flexibility to resize/reposition) than to simply wait for 1400c 06/2023 premium to decay.
The easy count, and the way I do it, is how many CC can I sell against shares vs CC against leaps (all of my leaps are long dated, deep ITM, calls). I'm also right at 20% right now, but I'm thinking about moving that closer to 50% or even higher. The key to my thinking is being VERY deep ITM. Current choice is $300 strike June '23s. At this strike it's roughly the same as owning shares at 1/2 price.
With delta on these calls at .90 I end up buying a few extra to keep overall delta the same or slightly higher.
There IS some leverage involved, but I'm buying these as share replacements, not for leverage (as I would be getting and doing for say $1000 strike June '23s).
Yep! It's also a lesson I learned from somebody else's experience (the best lessons of all, if one can actually learn them that way; I'm not always successful at that
). Close positions in a positive (do something) fashion, rather than letting them expire. If nothing else it's peace of mind and paying 1-10 cents to close a position yields a LOT of peace of mind, at least for me.Congrats on the results! In my mind the education and mutual learning / share experience is the whole point of the thread. I know it's helped me a lot as well. I hope we'll hear more from you and your own experiences - what worked well, what didn't work, any lessons you've learned and are carrying forward into the future, what you'll do differently in the future, etc..Just had to say how much I appreciate this thread
I have not done any of the advance strategies thus far, but having this education has been tremendous
I have been able to add an additional 5% of shares in my IRA so far this year
Best of all of course is when the 'failures' result in less profit than was available. Being paid to learn is the best of all.
What @Lycanthrope said
I find I'm becoming a lot more cautious on early rolls within the same expiration date. I've seen the shares move enough in a given week that I can roll closer and pick up some incremental premium within that week. These rolls have been very successful for me, many times. They are also how I've gotten myself into positions that are taking weeks and months to resolve. The incremental credit in those situations was definitely not worth it.More cautious mostly means I just don't do it anymore. If I'm ready to exit one position due to how little premium remains to be earned, then I am almost certainly going out a week at the same time.
If I were setting them early on, I would probably set them at $0.50. That's driven by a desire to avoid paying commission on the close (Fidelity has free BTC under 0.65 contract price) and a good price for an early exit, while also being unlikely to hit. I'd replace that later in the week and as we near expiration because I usually don't care positions into the final day of expiration.
I see the free BTC from Fidelity (and others) as encouragement to positively clean up positions that are expiring rather than letting them go to expiration and need weekend bookkeeping.
As somebody that has also previously sold long dated calls (Sep '22 840s; in my defense they were $4200 when the shares were something like $1400, pre-split). The biggest problem with those is the issue you mentioned - having those shares tied up for that long of a period. I'd like to be selling CC on a weekly basis but can't. Then again if I hadn't sold them I would have sold shares and I didn't want to do that, so its been a good solution to a bad situation.
And heck I'm starting to think that we'll be below $840 in a year and a half.
EDIT to add:
Building on the shares to LEAP conversions that I've done - one of the ideas I'm toying with is to convert a big pile of shares to leaps in the account with those 840cc's. That conversion would free up enough cash to buy out the 840cc and still leave me with additional cash to start selling puts with.
AND maintaining my current delta (or a bit more) will provide even more slots to be selling CC in. At .90 delta I need 10 of those long dated leaps for the same delta exposure as 900 shares (10cc instead of 9cc).
UPDATE! I found it. When I go to a Spread style ticket (and my guess is that any of the strategies will be the same), there is an Add Leg option. The moment I hit Add Leg it switched over to the custom ticket.
And then I'm in an option ticket in the new interface using the Custom ticket logic (I fill it all in).
For folks flirting with permaroll territory of rapidly dropping stock price for puts, is there an alternative? entering a put spread as a way to lessen the sting, or a diagonal put spread? Even if it costs more money in short term, or is it just far too expensive to do such a thing ?
Follow up question, seems like automating a protective bought option spread entry would be easier than watching for black swan, FUD news or macro events?
i have been rolling BPS +p565/-p575 for a few weeks now; approx $7k/wk credit.
So seems best when entered at same time…. Also the nature of the spread makes it so you don’t have to be so correct about the strike and can eek out a bit more time value rolling into new position.
what do you think about automating an entry to trigger on a certain stock price in weeklies? I imagine I could adjust the trigger price of the put with each night approaching expiration.
ive been studying the weekly price movements to see where the permaroll would fail on weeklies in the past. I like the idea of cutting my profit for the week when buying a put more than rolling to another week. But I imagine the gamma makes it ideal to roll rather than buy a put?
I’m referring to gamma as increasing gravity caused by a fast drop in stock price (I don’t know formal definition)… thereby making the bought put entered later disproportionately expensive. Working in my favor of I imagine this hedging idea… is the fact that it is more likely the stock goes wrong a day or two later after selling a put. This might make it cheaper to buy the put no?
@adiggs would this strategy have prevented your hell put or is it back to the drawing board for me?
Did you sell all your cc yesterday? I only sold 1/3 because I was thinking yesterday/today may continue to rise to 630 level a bit before FOMC. I should have sold the rest of cc when the premium was $5.5...
Was greedy and played safe yesterday
I closed all the 19 contracts that I opened yesterday at 70% profit for a $3647 win. I hope we get another opportunity to sell contracts this week.
Similar to Juan, closed 12x061821$630 contracts sto'd yesterday for 58% profit ($6k), once Fed announcement and macro reaction clears may reopen at higher strikes closer to cost basis of shares. Figured today was a one-time opportunity before several positive weeks ahead. Still watching and should probably move on $610's which are +34% at the moment vs. underwater when ITM this morning.
Yes, I think that selling the short puts as put credit spreads would have prevented the hell put (as I've taken to calling it
). That started out life as a -810p I think it was. Then in the big drop from 800s to 600s in a short time I rolled it down to some degree and had it stall as a -760p.If I'd sold those puts with a $50 or even $100 spread (+710p/-810p) then I'd have given up some of the initial premium to the insurance premium, and restricted my loss to that first $10k. H'mm... using the insurance idea on a consistent basis would also support selling more contracts and might offset the overall loss of premium. I haven't previously considered this idea - time to math!
My initial strategy idea here - I'm still thinking of this as selling puts, so I don't want to go too deeply into the margin side.
Some quickie math. If I were selling puts today it would be the June 25 560s for $6.40 (.21 delta). If I used the June 25 510s as insurance that'll cost me $2.10, for a net credit of ~4.30. It would also require $5k per contract sold instead of $56k so in theory I could go nuts and sell 11 for 1. But the risk of high % loss is much higher in this position than a short put.
So maybe once I've designed the position I do a number of spreads designed to create comparable income. If I could have sold 10 of those June 25 560s for a 6.40 credit or $6400 total, then I might sell 20 of the spreads for a $8600 credit. Or 15 for $6450 total. I'd have less total capital tied up and I would otherwise work the position like a naked put - rolling the whole spread or at least the short put when necessary to avoid it going ITM, with the insurance put out there to cover going really deeply ITM fast. One could be a lot more aggressive, but I would stay way far away from using all available capital for a given position; 1 max loss, which is much easier to achieve in a spread, and you've wiped out your capital. Leverage is a sharp double edged knife - it works for AND against you and needs to be managed accordingly.
Recent experience suggests to me that I'd be better off with a $30 or $40 spread - somewhere around that level is where effective rolls disappear, so the insurance put would put a floor underneath the potential losses on a big move against that I can't roll to keep up with.
Therefore an alternative position also available today. Use a bit more delta on the short side and a closer insurance put. The June 25 570s are priced at 8.40 (.26 delta - target .25), while the June 25 540s are at 3.85. Net credit is 4.55. Assuming I could have sold 10 of the short leg only that would be $8400 credit. Similar sized credit using the spread would be about 20 contracts (~$9000). The first position would tie up $570k of capital - the second position would use $60k ($3k per spread, 20 spreads).
In think that the management theme stays the same - roll for net credits, strike improvements, and time. The difference is that if the move is sharp and fast enough then there is a relatively small max loss and it's easier to just take it and start again. The downside is that 1 max loss ($51k if my math is right) will need nearly 6 wins to make up for it. As with most other positions managing the losers to make them much smaller and fewer in number is .. important.
That's a bunch of real time, think out loud musings. Definitely not advice - I don't even know if I'll do something with this. But the idea has wheels spinning.
Thanks @buttershrimp !
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Yes, I typically sell all CCs. I’m still in share acquisition mode with several years until I can access my retirement accounts. With today’s drop, I decided to close a few contracts and roll down.
BTC c640 @ $1.67 (added STO c625 @6.20 GTC order, still open).
BTC c620 @ $6.50 (rolled down to STO c615 @9.00).
BTC p610 @ $8.60 (STO p605 @$8.41, not a net credit, but close).
I still have some -c640s in one account that I’ll probably leave until Friday. As it is, I’ve already bought 14 shares today, so almost 3x my weekly goal. Plus, I still have enough free cash to buyback and roll as needed. Given the macros and open options, it sure seems likely that Friday’s close will be between $605 and $620, maybe another $609.89. I’m feeling very positive about my trades right now, but expect two more days of fireworks. However, Friday is another day.
Yes, I think that selling the short puts as put credit spreads would have prevented the hell put (as I've taken to calling it
If I'd sold those puts with a $50 or even $100 spread (+710p/-810p) then I'd have given up some of the initial premium to the insurance premium, and restricted my loss to that first $10k. H'mm... using the insurance idea on a consistent basis would also support selling more contracts and might offset the overall loss of premium. I haven't previously considered this idea - time to math!
My initial strategy idea here - I'm still thinking of this as selling puts, so I don't want to go too deeply into the margin side.
Some quickie math. If I were selling puts today it would be the June 25 560s for $6.40 (.21 delta). If I used the June 25 510s as insurance that'll cost me $2.10, for a net credit of ~4.30. It would also require $5k per contract sold instead of $56k so in theory I could go nuts and sell 11 for 1. But the risk of high % loss is much higher in this position than a short put.
So maybe once I've designed the position I do a number of spreads designed to create comparable income. If I could have sold 10 of those June 25 560s for a 6.40 credit or $6400 total, then I might sell 20 of the spreads for a $8600 credit. Or 15 for $6450 total. I'd have less total capital tied up and I would otherwise work the position like a naked put - rolling the whole spread or at least the short put when necessary to avoid it going ITM, with the insurance put out there to cover going really deeply ITM fast. One could be a lot more aggressive, but I would stay way far away from using all available capital for a given position; 1 max loss, which is much easier to achieve in a spread, and you've wiped out your capital. Leverage is a sharp double edged knife - it works for AND against you and needs to be managed accordingly.
Recent experience suggests to me that I'd be better off with a $30 or $40 spread - somewhere around that level is where effective rolls disappear, so the insurance put would put a floor underneath the potential losses on a big move against that I can't roll to keep up with.
Therefore an alternative position also available today. Use a bit more delta on the short side and a closer insurance put. The June 25 570s are priced at 8.40 (.26 delta - target .25), while the June 25 540s are at 3.85. Net credit is 4.55. Assuming I could have sold 10 of the short leg only that would be $8400 credit. Similar sized credit using the spread would be about 20 contracts (~$9000). The first position would tie up $570k of capital - the second position would use $60k ($3k per spread, 20 spreads).
In think that the management theme stays the same - roll for net credits, strike improvements, and time. The difference is that if the move is sharp and fast enough then there is a relatively small max loss and it's easier to just take it and start again. The downside is that 1 max loss ($51k if my math is right) will need nearly 6 wins to make up for it. As with most other positions managing the losers to make them much smaller and fewer in number is .. important.
That's a bunch of real time, think out loud musings. Definitely not advice - I don't even know if I'll do something with this. But the idea has wheels spinning.
Thanks @buttershrimp !
If you can roll a cash secured put thats gone itm instead of taking a loss, why couldn't you just roll the spreads similar way?
It's what I've been doing lately..
i was thinking the same thing this noon for next week's roll; instead of 100x 565/575, do 50x 530/560... credit will double from $7k to $15k, strike goes $15 lower, and delta is reduced from 34 to 27.Yes, I think that selling the short puts as put credit spreads would have prevented the hell put (as I've taken to calling it
If I'd sold those puts with a $50 or even $100 spread (+710p/-810p) then I'd have given up some of the initial premium to the insurance premium, and restricted my loss to that first $10k. H'mm... using the insurance idea on a consistent basis would also support selling more contracts and might offset the overall loss of premium. I haven't previously considered this idea - time to math!
My initial strategy idea here - I'm still thinking of this as selling puts, so I don't want to go too deeply into the margin side.
Some quickie math. If I were selling puts today it would be the June 25 560s for $6.40 (.21 delta). If I used the June 25 510s as insurance that'll cost me $2.10, for a net credit of ~4.30. It would also require $5k per contract sold instead of $56k so in theory I could go nuts and sell 11 for 1. But the risk of high % loss is much higher in this position than a short put.
So maybe once I've designed the position I do a number of spreads designed to create comparable income. If I could have sold 10 of those June 25 560s for a 6.40 credit or $6400 total, then I might sell 20 of the spreads for a $8600 credit. Or 15 for $6450 total. I'd have less total capital tied up and I would otherwise work the position like a naked put - rolling the whole spread or at least the short put when necessary to avoid it going ITM, with the insurance put out there to cover going really deeply ITM fast. One could be a lot more aggressive, but I would stay way far away from using all available capital for a given position; 1 max loss, which is much easier to achieve in a spread, and you've wiped out your capital. Leverage is a sharp double edged knife - it works for AND against you and needs to be managed accordingly.
Recent experience suggests to me that I'd be better off with a $30 or $40 spread - somewhere around that level is where effective rolls disappear, so the insurance put would put a floor underneath the potential losses on a big move against that I can't roll to keep up with.
Therefore an alternative position also available today. Use a bit more delta on the short side and a closer insurance put. The June 25 570s are priced at 8.40 (.26 delta - target .25), while the June 25 540s are at 3.85. Net credit is 4.55. Assuming I could have sold 10 of the short leg only that would be $8400 credit. Similar sized credit using the spread would be about 20 contracts (~$9000). The first position would tie up $570k of capital - the second position would use $60k ($3k per spread, 20 spreads).
In think that the management theme stays the same - roll for net credits, strike improvements, and time. The difference is that if the move is sharp and fast enough then there is a relatively small max loss and it's easier to just take it and start again. The downside is that 1 max loss ($51k if my math is right) will need nearly 6 wins to make up for it. As with most other positions managing the losers to make them much smaller and fewer in number is .. important.
That's a bunch of real time, think out loud musings. Definitely not advice - I don't even know if I'll do something with this. But the idea has wheels spinning.
Thanks @buttershrimp !
I'm sitting with my 612.50 puts in place this week. I decided not to roll them, because I figure this Jerome Powell thing will reverse by end of week and my breakeven is $601 stock price. If it doesn't reverse by Friday at noon, I'll probably roll it. I was actually fairly impressed that TSLA didn't get beaten up as badly as it could have today. It seemed like it wanted to climb but macros stopped party.
I hope you are correct, I'm hoping to end the rolling of my 620 and 625 -p's. I'm still rolling the 680s and see no end in sight of rolling the 760.
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