Wiki Selling TSLA Options - Be the House

[alterac000]

So I just started options in January taking advantage of high SP and decent volatility to sell long-dated CC's on my TSLA shares. After closing those, I played with weeklies.

Then on the 2nd tip, I sold long dated puts.

Then I took the full TD options course.

Now currently I have
1) sold puts on TSLA,
2) sold puts on CLOV (questionable)
3) sold vertical call spread on AMC
4) sold puts on GSAT

All currently profitable.

So not that I know what I'm doing, but quite a change from Dec where all I knew was buy and hold.

I feel like you did it right. I did everything the opposite and well...my outcome has been opposite of yours
Good news is my failures have kicked me into high gear to learn some things this year. Thanks to many here.

In my weeklies I now have +560 | -580 | -675 | +685 IC. My put arm is double the contracts of my call arm so I guess this is kind of a lopsided IC (and obviously the spread is larger on the put side).
620cc (have rolled this up and out for 2 weeks)
1 month out expiry 690cc - Decided to take the chance while reducing my margin balance significantly. Lots of sentiment that signs are pointing to a sp bounce soon. I will use the bounces to roll up and out if need to continue working down my margin balance.
I have kept my underwater Jan 21 2022 700 calls which breakeven at SP 865. If I had done things better I wouldn't have had bought these at near fatal timing December 2020. Knowing more about IV, I'd be entertaining buying now (actually the past several weeks while IV has been relatively low and SP sideways). Or call debit spreads to mitigate risk, especially if gambling on margin. In my situation best case scenario is these break even and I finally exit to clear my entire margin balance, but I'm operating under the mindset there is less than 50/50 chance for this.
I have a few sold June 17 2022 600 puts that for now are 'paying' for a portion of my margin interest. Don't have enough available margin to sell enough to cover full margin interest. Will keep these as long as I can meet margin requirements with them in.

 

[ZeApelido]

I feel like you did it right. I did everything the opposite and well...my outcome has been opposite of yours
Good news is my failures have kicked me into high gear to learn some things this year. Thanks to many here.

In my weeklies I now have +560 | -580 | -675 | +685 IC. My put arm is double the contracts of my call arm so I guess this is kind of a lopsided IC (and obviously the spread is larger on the put side).
620cc (have rolled this up and out for 2 weeks)
1 month out expiry 690cc - Decided to take the chance while reducing my margin balance significantly. Lots of sentiment that signs are pointing to a sp bounce soon. I will use the bounces to roll up and out if need to continue working down my margin balance.
I have kept my underwater Jan 21 2022 700 calls which breakeven at SP 865. If I had done things better I wouldn't have had bought these at near fatal timing December 2020. Knowing more about IV, I'd be entertaining buying now (actually the past several weeks while IV has been relatively low and SP sideways). Or call debit spreads to mitigate risk, especially if gambling on margin. In my situation best case scenario is these break even and I finally exit to clear my entire margin balance, but I'm operating under the mindset there is less than 50/50 chance for this.
I have a few sold June 17 2022 600 puts that for now are 'paying' for a portion of my margin interest. Don't have enough available margin to sell enough to cover full margin interest. Will keep these as long as I can meet margin requirements with them in.

All I know is it's best to play when the odds are stacked in your favor. I want to play options when multiple factors are strongly skewed in my perspective.

1) Price action
2) Volatility

When both of these are near peaks or valleys, the odds of the premium moving in the direction you want increase. The reason I am preferentially selling options is that I believe the distribution of volatilities is skewed - it is easier to cherry pick occasions where volatility is abnormally high vs abnormally low. But part of that is I haven't looked at for very low volatility occasions.

AMC is an extreme example - the volatility was extremely high for a period and one could argue the stock valuation isn't sustainable over a multiyear period. Thus I sell a vertical call spread so that I will be profitable if either the volatility goes down significantly or the price goes down. I find the likelihood of both happening high so I made this trade.

 

[ReddyLeaf]

You filled it nicely
I am not ready to be aggressive, I only sold 1 more 660cc @ 1.6

660 is a perfectly acceptable strike this week. You should be safe above that big 650 call wall. I started selling CCs in that range as well, and I should probably continue to stay more conservative. My more aggressive strikes (which I even knew at the time) were usually losers for me, either because I had to buyback at a loss or lost the shares. $1-$2 premiums still adds to the bottom line as long as one is consistently winning.

 

[CHGolferJim]

660 is a perfectly acceptable strike this week. You should be safe above that big 650 call wall. I started selling CCs in that range as well, and I should probably continue to stay more conservative. My more aggressive strikes (which I even knew at the time) were usually losers for me, either because I had to buyback at a loss or lost the shares. $1-$2 premiums still adds to the bottom line as long as one is consistently winning.

Indeed, I’ll just have to wait and see if the extra $5k in premiums for $640 vs. $652.50 (on reserve to fund a rollover, if needed) was a good or a bad decision.

 

[ReddyLeaf]

Indeed, I’ll just have to wait and see if the extra $5k in premiums for $640 vs. $652.50 (on reserve to fund a rollover, if needed) was a good or a bad decision.

Well, some big fish just decided to drop the SP, so it’s now looking good. You also did better than I. I sold c637.50s for $4.80 this AM, during the beginning of the MMD (too slow). I’m not too worried as my 625/615/610 puts are doing great, down 50% single I sold them.

 

[generalenthu]

Put in a GTC order to sto 061821$640 covered calls at $5.00......need SP ~$624?
Will be a week of careful monitoring with 061821$627.50 currently ~25% profit.
In recent weeks, somewhat aggressive strike price pegging has paid well or been rollable to following week.

I suppose you were referring to the 6/25 calls, which I sold 30x this morning at 5.70. Would have got a good bit more on Friday, but it looked like everyone was bracing for a strong Monday / Tuesday, after a strong ending to last week. That pop never materialized.

Looking for a slightly slow n steady week. And positioned for a faster ramp into P&D. Unlike the heavy option open interest present last week, the calendar is pretty clear until September.

 

[adiggs]

As with others, I've begun selling put and call spreads rather than simply puts (i.e. iron condors). I've got some observations that are from getting started - what it looks like so far and how I'm approaching things.

NOT-ADVICE


My starting point is that I am using is that instead of using cash to back put sales, I am using that cash to back put credit spreads. And then, having sold the put credit spread, I also get a similarly sized and structured call credit spread for "free". It's not actually free of course, but it doesn't carry any incremental margin impact -- it does carry incremental risk (and reward / credit).

The net of the two is that I enter Iron Condors via two trades (put credit spread, call credit spread). I can get there via a single transaction should I choose. But I think of these as 2 positions - if for no other reason than that is how I manage them.

As the margin / backing for a credit spread is dramatically lower than what is needed for a naked put I can sell a LOT more of these. As a for instance - a $25 spread needs $2500 to back it, while a $500 strike put needs $50k as backing. That means I can sell 20 of the first to 1 of the second. This has desirable properties for me. One is that I can use 1/4th or less of my cash to back these spreads and in practice I'm finding that my earnings are somewhere between comparable and much better.

And as a result I've got a lot more unencumbered cash in the brokerage account - cash that I am also using for living expenses and large purchases; such as a downpayment on a house or what have you. That additional flexibility on the spending side would be worthwhile all on its own, even if the rest of this was a wash on risk and income levels.


Some notes about how I'm thinking and managing these positions.
1) I normalize these different trades by choosing a position size and using it consistently. Maybe I use $10k as my position size - that means I'll sell 4 of a $25 credit spread ($2500 * 4) or 5 of a $20 spread (5*2000). By having a consistent position size, then I don't need to watch any position more than another due to amount at risk. It also makes it a lot easier to compare results position to position.

As I gain more experience I can readily imagine increasing the position size. The only difference in setup, management, and teardown of a $10k position size vs. $100k position size is the number of contracts. The effort is the same.

2) I have mostly been using delta to decide on my entry strikes. I think of these in terms of the short put and short call, with the insurance being $20 or $25 further back. I'm not stuck on those two spread sizes - its just what I've been using so far, and I have a bias towards bigger spread sizes over smaller (larger total credits providing a larger window for a break even or slightly better result).

My target delta has so far been .10. I'm finding significantly better credits on the call side and my thinking is shifting towards .15 put delta and .10 call delta. The real point is that I want pretty low risk positions. I find I am getting completely adequate results with these distant deltas.

3) By normalizing my entry points using delta I am finding that the trades behave in remarkably similar fashion. The size of the entry credits are in the same ballpark (my target is 10% of the spread size, with actual credits in the 7-12% range). The spread value changes very slowly until the final day when the bulk of the earnings finally occurs. The real difference between opening earlier in time (5-10 DTE) vs later (1-3 DTE) is not in the credit but in the strikes used for the entry. With fewer DTE the strikes get closer and closer to the share price. A 7 DTE I opened last week for expiration this week started with a $130 difference between the put and call legs. A 3 DTE I opened last week was more like a $60 difference.

4) My exit strategy is for most of these positions to go to expiration worthless, or come close enough for a small cost early close. If the difference between the put and call options is large enough then a reasonably large fraction of these will indeed go to expiration worthless.

5) For management I hope to be able to roll a winning leg closer for an incremental credit. So far this seems to happen about 1 or 2 days to expiration. So far this is mostly what I'm seeing. For the losing leg I will have a bias towards an early close for a small loss over rolling the leg out a week, though both are available. I know that there is a max loss from the insurance but I want to take small losses more frequently over allowing a larger loss to develop.

Rolling a winning leg for incremental credit - I tend to use max pain / put call / call wall / BB type of information to find a strike that I consider safe. The delta tends to not be important to me. In fairness these have also been positions that were 1 or 2 DTE - I have a lot more info at that point about what will happen in 2 days.

6) I haven't figured out the 'right' DTE to open. I don't really think that there is one, but I'm getting a feel for how these evolve and expect to find the balance that works for me. I've done both 3 and 7 DTE ICs so far and liked how both of them have worked.


That's about what I've got so far. I'm interested in learning about what others have been learning in their put and call credit spread efforts.

 

[alterac000]

As with others, I've begun selling put and call spreads rather than simply puts (i.e. iron condors). I've got some observations that are from getting started - what it looks like so far and how I'm approaching things.

NOT-ADVICE


My starting point is that I am using is that instead of using cash to back put sales, I am using that cash to back put credit spreads. And then, having sold the put credit spread, I also get a similarly sized and structured call credit spread for "free". It's not actually free of course, but it doesn't carry any incremental margin impact -- it does carry incremental risk (and reward / credit).

The net of the two is that I enter Iron Condors via two trades (put credit spread, call credit spread). I can get there via a single transaction should I choose. But I think of these as 2 positions - if for no other reason than that is how I manage them.

As the margin / backing for a credit spread is dramatically lower than what is needed for a naked put I can sell a LOT more of these. As a for instance - a $25 spread needs $2500 to back it, while a $500 strike put needs $50k as backing. That means I can sell 20 of the first to 1 of the second. This has desirable properties for me. One is that I can use 1/4th or less of my cash to back these spreads and in practice I'm finding that my earnings are somewhere between comparable and much better.

And as a result I've got a lot more unencumbered cash in the brokerage account - cash that I am also using for living expenses and large purchases; such as a downpayment on a house or what have you. That additional flexibility on the spending side would be worthwhile all on its own, even if the rest of this was a wash on risk and income levels.


Some notes about how I'm thinking and managing these positions.
1) I normalize these different trades by choosing a position size and using it consistently. Maybe I use $10k as my position size - that means I'll sell 4 of a $25 credit spread ($2500 * 4) or 5 of a $20 spread (5*2000). By having a consistent position size, then I don't need to watch any position more than another due to amount at risk. It also makes it a lot easier to compare results position to position.

As I gain more experience I can readily imagine increasing the position size. The only difference in setup, management, and teardown of a $10k position size vs. $100k position size is the number of contracts. The effort is the same.

2) I have mostly been using delta to decide on my entry strikes. I think of these in terms of the short put and short call, with the insurance being $20 or $25 further back. I'm not stuck on those two spread sizes - its just what I've been using so far, and I have a bias towards bigger spread sizes over smaller (larger total credits providing a larger window for a break even or slightly better result).

My target delta has so far been .10. I'm finding significantly better credits on the call side and my thinking is shifting towards .15 put delta and .10 call delta. The real point is that I want pretty low risk positions. I find I am getting completely adequate results with these distant deltas.

3) By normalizing my entry points using delta I am finding that the trades behave in remarkably similar fashion. The size of the entry credits are in the same ballpark (my target is 10% of the spread size, with actual credits in the 7-12% range). The spread value changes very slowly until the final day when the bulk of the earnings finally occurs. The real difference between opening earlier in time (5-10 DTE) vs later (1-3 DTE) is not in the credit but in the strikes used for the entry. With fewer DTE the strikes get closer and closer to the share price. A 7 DTE I opened last week for expiration this week started with a $130 difference between the put and call legs. A 3 DTE I opened last week was more like a $60 difference.

4) My exit strategy is for most of these positions to go to expiration worthless, or come close enough for a small cost early close. If the difference between the put and call options is large enough then a reasonably large fraction of these will indeed go to expiration worthless.

5) For management I hope to be able to roll a winning leg closer for an incremental credit. So far this seems to happen about 1 or 2 days to expiration. So far this is mostly what I'm seeing. For the losing leg I will have a bias towards an early close for a small loss over rolling the leg out a week, though both are available. I know that there is a max loss from the insurance but I want to take small losses more frequently over allowing a larger loss to develop.

Rolling a winning leg for incremental credit - I tend to use max pain / put call / call wall / BB type of information to find a strike that I consider safe. The delta tends to not be important to me. In fairness these have also been positions that were 1 or 2 DTE - I have a lot more info at that point about what will happen in 2 days.

6) I haven't figured out the 'right' DTE to open. I don't really think that there is one, but I'm getting a feel for how these evolve and expect to find the balance that works for me. I've done both 3 and 7 DTE ICs so far and liked how both of them have worked.


That's about what I've got so far. I'm interested in learning about what others have been learning in their put and call credit spread efforts.

Thank you for this nice write up. Fwiw I do the vast majority of what you've described with some personal touches to fit my needs. I feel it is worth re-sharing below (credit Yoona) which may help validate your strategies and also for others trying to learn more about ICs:

i watched this last night about adjusting IC

Adjusting Credit Spreads, Iron Condors, and Calendars

Here is Option Alpha's complete guide to adjusting credit spreads, iron condors, and calendars.

optionalpha.com

A couple comments from my experience and naturally not advice -
Position size: agree the work to identify the setup is the same regardless of lot size. At the same time I advise a healthy respect for the risks that come along with larger positions. I have also been experimenting with lopsided arms (i.e. my prior post on having more put credit spreads than call credit spreads, and also having different gaps on each arm). This changes the risk profile from a traditional IC.

Regarding deltas I use similar thresholds for short term expirations - for me I am usually making 7-14 dte IC positions but have also done some 3-5 dtes. For those going closer to 14+ dte I am more willing to deviate from the 0.1 Delta range. Conceptually I think of this as being willing to take more risk (higher delta) for longer out expirations; my reasoning is if I am wrong on the direction and volatility of the stock, I will have more time to course correct as needed. If I end up safe, I'm happy to pocket the additional credit.

As management strategies I also favor both tightening the gap between the arms/rolling the winning leg if I feel confident, and also taking early small losses if really wrong about the final sp at expiration. Trading spreads is definitely different than trading shares or single option positions as direction and volatility impact the spread gap significantly. Lot sizes also really start to weigh heavily on the risk profile of losing arms. There are some rollout possibilities for losing arms but what I have learned is that if the sp is truly moving against you, you are going to find it extremely difficult to find a roll that gives a net credit. By the time the sp has exceeded either side of your IC arms, the market has priced in future spreads that are no longer favorable to the original spread. If you do find a roll for credit, it is almost certainly going to be for a worse strike, a larger gap, and/or significantly out in expiration, all of which equate to a much higher risk position than the original. I have debated doing this on some occasions but ultimately decided my conviction was not strong enough, and instead take the opportunity to reset my thoughts on expected sp for my next credit spread attempt.

Thanks again for sharing and I also look forward to other input.

 

[Criscmt]

@adiggs @bxr140 @generalenthu and all others, any thoughts on these trades, particularly the 1:2 spreads aspect?
Looks like the call side trade was hoping for shares trading within ~655 - ~725 range, and put side is positioning for a drop below 580.

 

[Yoona]

Thank you for this nice write up. Fwiw I do the vast majority of what you've described with some personal touches to fit my needs. I feel it is worth re-sharing below (credit Yoona) which may help validate your strategies and also for others trying to learn more about ICs:


A couple comments from my experience and naturally not advice -
Position size: agree the work to identify the setup is the same regardless of lot size. At the same time I advise a healthy respect for the risks that come along with larger positions. I have also been experimenting with lopsided arms (i.e. my prior post on having more put credit spreads than call credit spreads, and also having different gaps on each arm). This changes the risk profile from a traditional IC.

Regarding deltas I use similar thresholds for short term expirations - for me I am usually making 7-14 dte IC positions but have also done some 3-5 dtes. For those going closer to 14+ dte I am more willing to deviate from the 0.1 Delta range. Conceptually I think of this as being willing to take more risk (higher delta) for longer out expirations; my reasoning is if I am wrong on the direction and volatility of the stock, I will have more time to course correct as needed. If I end up safe, I'm happy to pocket the additional credit.

As management strategies I also favor both tightening the gap between the arms/rolling the winning leg if I feel confident, and also taking early small losses if really wrong about the final sp at expiration. Trading spreads is definitely different than trading shares or single option positions as direction and volatility impact the spread gap significantly. Lot sizes also really start to weigh heavily on the risk profile of losing arms. There are some rollout possibilities for losing arms but what I have learned is that if the sp is truly moving against you, you are going to find it extremely difficult to find a roll that gives a net credit. By the time the sp has exceeded either side of your IC arms, the market has priced in future spreads that are no longer favorable to the original spread. If you do find a roll for credit, it is almost certainly going to be for a worse strike, a larger gap, and/or significantly out in expiration, all of which equate to a much higher risk position than the original. I have debated doing this on some occasions but ultimately decided my conviction was not strong enough, and instead take the opportunity to reset my thoughts on expected sp for my next credit spread attempt.

Thanks again for sharing and I also look forward to other input.

One strategy i used (not advice) in fixing DITM spreads is temporary massive cash infusion. Works only on cash trading accounts.

For example, a BPS -p650/+p675 is almost impossible to roll for credit if the same strikes are used. At 620, maybe it's a long wait for SP to move up 675+. My temp solution in this case is to find huge cash somewhere (ie Line of Credit) and transfer it into the account. Roll the BPS down steeply 1 month out to a lower/wider +p550/-p620 for credit(!) and it has a very good chance of expiring worthless or at least break even. The farther the new date, the less LOC cash is needed for the huge margin requirement. Account risk is higher, so it is not for weak stomachs.

Return the cash to the LOC when done. Interest is peanuts compared to nonstop rolling debits.

 

[buttershrimp]

You’re a bigger trader than this nervous Nellie with ONE bought 7/02 c635. With my modest needs/wants/lifestyle, I’m happy sitting on the porch, glass of wine in hand, waving to the neighborhood dog walkers while skimming a few $K/wk on weekly call/put sales. It’s enough to pay those future bills in retirement, maybe a new Plaid or two, and even a island vacation, but just not enough to buy that island.

One observation that might assist you: The SP often has a daily dampened ringing effect (e.g. higher SP peaks and valleys early in the day followed by lower and lower peaks and/or valleys). Sometimes this seems to flow into the weekly as well. I can’t and won’t day trade, so this pattern may not actually be repetitive enough for routine profitability, but it has helped me on buyback/rolling options. Good luck on that SP pop, I’m expecting a little action and Friday close $625.01-$634.99, biased higher.

Fantastic. I don’t feel comfortable selling calls this week quite yet as my price prediction this week is 674. Your advice on the dampened ringing effect is fantastic. By the way, is what I’m doing considered daytrading? I said I’d never do that again after getting beat up trying that for a few days. That is the devils playground. Why does buying calls (and puts) and trying to offset oscillations seem safer to me? I’m really just trying to pay for my calls while I wait for the inevitable pop to occur this week or next. I’m trying to delta boost my shares on these two weeks I think are very likely to surge.

 

[Chenkers]

and all others, any thoughts on these trades, particularly the 1:2 spreads aspect?
Looks like the call side trade was hoping for shares trading within ~655 - ~725 range, and put side is positioning for a drop below 580.

These guys look like typical traders placing chicken feed trades on the basis of technicals with Low/No depth of knowledge of the actual company, it's performance and where it's going. I'm so glad the knowledge gained mostly through this forum allows me to trade much more significant amounts with lowish risk based on a deeper level of information. I wouldn't be trading as far out as they are atm, particularly with P&D. I'm much happier sticking to a simpler 1:1 +/- spread where you don't need to buy the extra put and I wouldn't want to enter a spread at a debit.

More detail on the 1:2 strategy here (but I'm not a fan): 1x2 Ratio Vertical Spread with Puts - Fidelity

 

[juanmedina]

660 is a perfectly acceptable strike this week. You should be safe above that big 650 call wall. I started selling CCs in that range as well, and I should probably continue to stay more conservative. My more aggressive strikes (which I even knew at the time) were usually losers for me, either because I had to buyback at a loss or lost the shares. $1-$2 premiums still adds to the bottom line as long as one is consistently winning.

This is my way. I do some option selling for my parents and on their account I am doing way better because I am less aggressive with the strikes than I am with my account. With what it seems like safe strikes my week goes easier and they are way less stressful.

$632 after hours sweet... I been thinking about selling 700s for next week. The premiums at the strikes I am looking at are to low for this week, any thoughts?

 

[buttershrimp]

You’re a bigger trader than this nervous Nellie with ONE bought 7/02 c635. With my modest needs/wants/lifestyle, I’m happy sitting on the porch, glass of wine in hand, waving to the neighborhood dog walkers while skimming a few $K/wk on weekly call/put sales. It’s enough to pay those future bills in retirement, maybe a new Plaid or two, and even a island vacation, but just not enough to buy that island.

One observation that might assist you: The SP often has a daily dampened ringing effect (e.g. higher SP peaks and valleys early in the day followed by lower and lower peaks and/or valleys). Sometimes this seems to flow into the weekly as well. I can’t and won’t day trade, so this pattern may not actually be repetitive enough for routine profitability, but it has helped me on buyback/rolling options. Good luck on that SP pop, I’m expecting a little action and Friday close $625.01-$634.99, biased higher.

Follow up question, what characteristics do you see on days when the dampepend ringing effect doesn’t take place, aka big surges? Large premarket swell? Macros? Good to know when to let bought positions ride higher if clearly itm. My strategy was to buy cheap puts to “lock in” my gains rather than abandon itm calls that are ditm. What do you think?

 

[Chenkers]

$632 after hours sweet... I been thinking about selling 700s for next week. The premiums at the strikes I am looking at are to low for this week, any thoughts?

I'm wary of having CC's open near that price next week on the chance that Tesla release P&D numbers pre-market on the 2nd. At the least I wouldn't be selling until I can see if the price is being bid up much in anticipation next week to gauge where it could land if numbers get released before the weekend.

 

[juanmedina]

I'm wary of having CC's open near that price next week on the chance that Tesla release P&D numbers pre-market on the 2nd. At the least I wouldn't be selling until I can see if the price is being bid up much in anticipation next week to gauge where it could land if numbers get released before the weekend.

Yeah I am not holding those call until Friday. Analyst consensus is at 205k .... that seems kind of high. Troy is at 199k I wonder if they are setting us up for failure.

 

[ZeApelido]

Saw this initial spike so sold 19 x 6/25 $685 CC's for $1.5

 

[tradenewbie]

Couldn't wait to sell the remaining 2 660cc @ 1.53, 2.77 immediately after open (thought it has gap up in pre-market already and expect it would retrace quite fast). Turn out it keeps rising non-stop now.....

When I put a particular premium amount in limit order last two days, it never met and the SP then drop. And therefore today I just try to catch it fast with market order during the immediate gap up, but then the SP continue to rise. What a tough game.

 

[buttershrimp]

Couldn't wait to sell the remaining 2 660cc @ 1.53, 2.77 immediately after open (thought it has gap up in pre-market already and expect it would retrace quite fast). Turn out it keeps rising non-stop now.....

When I put a particular premium amount in limit order last two days, it won't met. When I just try to catch it fast with market order, it comes and continue to rise. What a tough game.

We want to roll calls baby…. Means life is good

 

[buttershrimp]

I bought 3x 620 puts @2 to lock in my call gains and let these 15x 620c puppies run. I call it the aikido strangle using my opponents momentum against him