Wiki Selling TSLA Options - Be the House

[buttershrimp]

I've been trading mostly a permanent short strangle for a while now, usually weighted about 3:1 puts to calls. I finally decided to sell my first BPS on Wednesday. I went very conservative with a 7/30 +440/-520 for $2.25 credit, just to see the mechanics of the trade and watch how it reacts to price movements. I like the idea of a more defined risk and also the additional control of being able to BTC the short leg and let the long leg run (in addition to rolling) if the trade goes against me.

How has the return been on your perma strangle of that ratio? Do you sell naked puts and own the shares outright no margin? That was my most successful strategy before trying cocaine options/ aka long calls. Planning best way to rebuild my bank once I get through stitching my nostrils shut.

 

[adiggs]

I've been trading mostly a permanent short strangle for a while now, usually weighted about 3:1 puts to calls. I finally decided to sell my first BPS on Wednesday. I went very conservative with a 7/30 +440/-520 for $2.25 credit, just to see the mechanics of the trade and watch how it reacts to price movements. I like the idea of a more defined risk and also the additional control of being able to BTC the short leg and let the long leg run (in addition to rolling) if the trade goes against me.

Something that's been helping me as I'm getting more into BPS is to occasionally setup a roll - especially if the shares start moving against me - to see what is possible. What I've been seeing is that with these wider spreads is that the overall spread behaves, at least for rolling purposes, much like a short put.

 

[corduroy]

How has the return been on your perma strangle of that ratio? Do you sell naked puts and own the shares outright no margin? That was my most successful strategy before trying cocaine options/ aka long calls. Planning best way to rebuild my bank once I get through stitching my nostrils shut.

The return has been good. I'm conservative with my strikes, so I definitely leave money on the table. I've never been assigned or had shares called away (with TSLA that is.. I have run the wheel with cheaper stocks just to see the process). The puts are cash/margin backed and provide probably 80% of the profits, with short calls added opportunistically. I haven't bought any shares or options on margin.

 

[buttershrimp]

I ask this because I discussed something a bit similar with @adiggs which is the idea of owning shares fully and selling naked puts on the excess margin, and in the worst case scenario the shares could be sold if assigned a put early. The idea being that level 3 options at Schwab allow you to sell naked puts based on your margin available. In essence, rather than selling 1 cash based put, I could sell 2 or 3. And simultaneously be selling calls on my shares. I’ve done exactly what you are describing but i owned max shares and then used my margin to sell puts. I was aggressive with the strikes of the puts and so I had to roll them once or twice. On one occasion I left my puts in the fray and rolled half of the naked only puts if I had to purchase shares on margin. They both did fine… but I’m just wondering if anyone else uses this method? As someone who has owned a lot of shares in the past on margin, I don’t consider the strategy to be particular high risk as long as you can roll out and stay above breakeven price, also you aren’t paying interest on the margined shares.

 

[Xepa777]

I ask this because I discussed something a bit similar with @adiggs which is the idea of owning shares fully and selling naked puts on the excess margin, and in the worst case scenario the shares could be sold if assigned a put early. The idea being that level 3 options at Schwab allow you to sell naked puts based on your margin available. In essence, rather than selling 1 cash based put, I could sell 2 or 3. And simultaneously be selling calls on my shares. I’ve done exactly what you are describing but i owned max shares and then used my margin to sell puts. I was aggressive with the strikes of the puts and so I had to roll them once or twice. On one occasion I left my puts in the fray and rolled half of the naked only puts if I had to purchase shares on margin. They both did fine… but I’m just wondering if anyone else uses this method? As someone who has owned a lot of shares in the past on margin, I don’t consider the strategy to be particular high risk as long as you can roll out and stay above breakeven price, also you aren’t paying interest on the margined shares.

i do the same thing lol. Sell outs against margin and covered calls in the same week. Pennies but hey a stress free $200-$1200 a week isn’t bad for fifteen minutes of effort! Certainly pays for the bills lol.

 

[MXWing]

i do the same thing lol. Sell outs against margin and covered calls in the same week. Pennies but hey a stress free $200-$1200 a week isn’t bad for fifteen minutes of effort! Certainly pays for the bills lol.

Covered strangles are my favorite. But I've omitted the selling calls part for some time.

It's like an easy tens of thousands over a few months, but one day you get taken for a hundred thousand.

I'll still sell calls on shares I'm not attached too but my long term position - no f way. People pay a lot for those calls, because one day they will catch a $100 point move up or a stock split announcement that will trap shorts.

 

[Chenkers]

… but I’m just wondering if anyone else uses this method?

This is what I and a lot of others on here do. I'm essentially a HODL'r with my long term shares and leaps, although I do sell some covered calls against these when I'm happy to do so (most weeks). The maintenance margin buffer that results from the held shares is what I use to back Puts, BPS's or IC's. This is where most of my premium revenue comes from, typically in the multiple tens of thousands per week. However if I get greedy and eat into too much margin buffer I can be left rolling for a few weeks (where I am now) before the positions recover. Whereas if I maintain a healthy margin buffer I can usually sort things out quicker using the margin buffer to invert spreads or do whatever is required to overcome a big move in the share price.

 

[buttershrimp]

This is what I and a lot of others on here do. I'm essentially a HODL'r with my long term shares and leaps, although I do sell some covered calls against these when I'm happy to do so (most weeks). The maintenance margin buffer that results from the held shares is what I use to back Puts, BPS's or IC's. This is where most of my premium revenue comes from, typically in the multiple tens of thousands per week. However if I get greedy and eat into too much margin buffer I can be left rolling for a few weeks (where I am now) before the positions recover. Whereas if I maintain a healthy margin buffer I can usually sort things out quicker using the margin buffer to invert spreads or do whatever is required to overcome a big move in the share price.

Thanks for this! Can you tell me (if you have time) what you mean by invert spreads in response to dropping price? Do you just mean forming a bull put spread ? The “inversion” is what is confusing me

 

[Chenkers]

Thanks for this! Can you tell me (if you have time) what you mean by invert spreads in response to dropping price? Do you just mean forming a bull put spread ? The “inversion” is what is confusing me

I realised after I wrote that that 'inversion' can have different meanings with options. There are a range of strategies I would put under this. These include turning a regular Put into multiple BPS well below the stock price so they close out. Another is to swap a BPS for a call spread or vice versa. Another would be selling a better placed IC and using the premium to close out the losing position. All these things can generally done for cost neutral premium but typically require a lot more margin to achieve. If I have margin I can transform a losing options position into a winning one. Without sufficient margin I'm just left with rolling and selling covered calls where reasonable, which will often take longer. Note this is all using excess maintenance margin, I almost never have a negative margin balance that's paying interest.

 

[phantasms]

Here's my gentle T-ball moves made right at the open. I've got another option in the barrel to use.

 

[Yoona]

I realised after I wrote that that 'inversion' can have different meanings with options. There are a range of strategies I would put under this. These include turning a regular Put into multiple BPS well below the stock price so they close out. Another is to swap a BPS for a call spread or vice versa. Another would be selling a better placed IC and using the premium to close out the losing position. All these things can generally done for cost neutral premium but typically require a lot more margin to achieve. If I have margin I can transform a losing options position into a winning one. Without sufficient margin I'm just left with rolling and selling covered calls where reasonable, which will often take longer. Note this is all using excess maintenance margin, I almost never have a negative margin balance that's paying interest.

This is an example: Applying options strategy 'the wheel' to TSLA

 

[juanmedina]

are you guys having issues trading today? Power E-trade doesn't work, the option prices are all wrong. I am not happy I wanted to roll some positions.

 

[phantasms]

I'm on JMPChase. No issues other than their TSLA PT and oil holdings.

 

[Yoona]

are you guys having issues trading today? Power E-trade doesn't work, the option prices are all wrong. I am not happy I wanted to roll some positions.

TD has issues. All options prices $0.

 

[juanmedina]

TD has issues. All options prices $0.

I am trying to chat with someone and the wait is 30 minutes. What happens if you loose money because their system is down? are you SOL?

 

[Yoona]

I am trying to chat with someone and the wait is 30 minutes. What happens if you loose money because their system is down? are you SOL?

Since i have thinkorswim (cash acct), i can see realtime values. Then, i just manually enter them on TD (retirement acct) and it works as long as i don't use the useless chain.

 

[phantasms]

Since i have thinkorswim (cash acct), i can see realtime values. Then, i just manually enter them on TD (retirement acct) and it works as long as i don't use the useless chain.

Could you possibly give me a screenshot of what that looks like on ThinkorSwim? I have that platform as well but never did anything with options on it. I'm still trying to find the best tool for figuring out which calls to sell.

 

[Yoona]

Could you possibly give me a screenshot of what that looks like on ThinkorSwim? I have that platform as well but never did anything with options on it. I'm still trying to find the best tool for figuring out which calls to sell.

 

[Yoona]

oops forgot the 700's

 

[adiggs]

As others - busy morning for me. We finally see the move that I've been waiting for, and thus:
- the primary move for me is selling a stack of lcc for this Friday; 690s for just under $11 credit. My plan here is to taunt the share price for assignment with an expectation that I'll roll this strike up 1 or 2 times into the 720-750 range if necessary before taking assignment. And if the shares don't come up then I'll take the high credit and do the same next week, repeat as many times as possible. These lcc are abound the .33 delta - really high for me, but also about where I've wanted to be with these.

The backing long dated calls are mostly ones that I want to be assigned on before October, and September is preferable (Dec expirations) so I don't have as much time decay.

- rolled some BPS for this week our to Aug 6th at similar strikes (580ish - 600ish). The current positions are about 50% ahead ($2 out of $4), so the net credits aren't high ($2ish). My thinking is that will be a higher credit to crash tomorrow with IV, so a better absolute result.