I said yesterday that I'd try to contribute a bit of what I've learned. I've been trading options in general for a couple of years, and TSLA heavily for the last 3 months. This won't be a long guide or anything like that, but maybe some more data for everyone to digest. Thanks again to everyone for sharing their trades and strategies.
Like most of the folks here, I'm selling options for the most part. I've got 3 main strategies.
- Iron Condors. Hopefully this is a well know strat. Just look at supports and resistances and call/put walls, and sell maybe 5 points outside of those. Eg, this week I put on 690p/670p/750c/770c. Assuming that the SP stays between 690 and 750, I'll take home about $3 per contract. If it goes against me, I can roll or take a 17k loss per contract. I'd probably close the position early if it looked that dangerous though (eg, stock split was announced).
- Naked Condor (I made that name up, maybe what I'm doing is actually called something). This is riskier, and what I mainly try to do. Basically I use the volatility of the stock to try to time putting on each half of an IC. So for instance, if the stock is near support and/or a put wall, I'll sell a naked put, or a put spread either ATM or just outside support. Then I'll put in a market order for a call (sell calendar against my LEAPs) to be executed when the stock price reaches what I think is reasonably close to the resistance.
- Eg, yesterday I sold two put spreads, 700/650 and 695/610, when the SP was around 705 (which I incorrectly thought would be the bottom). Then I sold some 720 calls when the price had recovered a bit. It then continued to recover back up to resistance (715ish) and so I sold some more.
- Best results I get from this are from using limit orders (actually market orders set to execute on a SP target on Thinkorswim). If I try to sit there and watch the ticker, I get impatient. You want to go $1-$1.50 away from where you think the SP should go; eg, this morning maybe you thought we'd retest the 715 resistance, so I'd put in order in for 713.50 (which it hit) if I wanted more calls sold.
- I try to balance the positions. So if I have 10k of credit sold on the put side, I'm going to look to open about 10k of credit on the call side.
- If the SP moves dramatically, I'll probably close the half of it that's 80%+ profit and look to reopen it later in the week, or roll it up to a closer to the money strike. Depending on the week, I might close all of my positions early if I suspect a big move from MMs on Friday, or if I'm just happy with my profits.
- Friday frenzy. Unfortunately, it seems that the MMs have near iron control of the SP, at least for the last few months on low volume and on Fridays to meet max pain. Why not take advantage of that knowledge, is my thinking. So on Fridays, I'll look to sell ITM options that are near max pain. Eg, last Friday, I should have sold 697.5p in the morning, since that was max pain and about 15 points away from open. I didn't, so that Friday went poorly. I've done both incredibly well and very poorly with this strat, so I'm planning to tone it down. I'd rather do fun things on Friday anyway.
Other general things I've learned:
Selling ATM is the best bang for your buck, but it is also giving me grey hair
. I'm moving to more ICs and not futzing with my positions so much.
The selling against LEAPs strategy is also called a calendar spread or a Poor Man's Covered Call, if you want to google them. I chose to do that instead of buying shares because I wanted a large cash position, and because I think TSLA will dramatically increase in price sometime this year. The upside is that I can sell more calls for less principle, and I have way more delta exposure than if I were holding shares. The downside is that if the stock price doesn't rise regularly, I'll have to use the premiums I'm collecting to pay for theta. Also, if the SP goes really far against me, I will have to use too much margin on the spreads to keep trading. Eg, I'm holding a lot of 600 strike LEAPs, which is great for right now, but if the SP dropped to 500, then I'd have to use as much as 10k margin per covered leap in this strategy. So I'd need to sell those LEAPs and buy further down. I had this problem when I was first starting out due to TSLA's poor spring.
Managing positions. Generally, unless you have a pretty good reason to think otherwise, when you're afraid is when you should buy, and when you're greedy is when you should sell. Let's say I had on some sold 720 calls that I opened at SP 715, and the SP shoots to 725, putting my position down $600 or so per contract. That's going to look scary as heck, and the temptation is to close the position for a loss. Sometimes that's what I would do, but generally the better play is to average in and sell more. I might reevaluate if the SP hits 730, but generally the SP will dip again shortly, and then if I don't like the position, I can exit even instead of at a loss. This is risky, but it works more often than it doesn't. This does mean that I'm using not using all of my firepower though. Eg, if I can sell 40 calls on LEAPs, then I'll try to target 20 calls sold so that I can get myself out of trouble (or into more, lol) if need be. Also, that lets me roll into next week if I have to and still have some firepower.
Obviously, not advice, just what I'm doing. It's been mostly successful, but I always wish I could do better. Still learning!
Some resources:
The Stocks Channel:
This guy does a daily review of the markets as well as a few large cap stocks. TSLA is one he covers every day, with supports and resistances. He's great, imo, and I also sub to his discord server for additional info and updates during the day on the market in general.
Barchart:
Support Resistance, Pivot Points for Tesla Inc with Key Turning Points and Technical Indicators.
www.barchart.com
Barchart.com offers some decent support and resistance levels for any stock. I don't rely on this exclusively, but like to actually look at the chart, and see what youtubers have to say as well.
Max Pain:
maximum-pain.com
I assume everyone here already knows about this.
