Wiki Selling TSLA Options - Be the House

[stealthyc]

The 700s are expiring in 3 weeks anyway, so I would have to roll/close them soon ..
Currently they form a diagonal bull call spread. If so spikes to 800, then I cannot roll & would have to close for a measly profit of 19k this week.. instead of the 70k I would have gotten on the calls alone .. but on the other hand: 800 by Friday? I don't think so, Jim

Well I do remember a couple weeks ago the price being around 720 and you listed some put spreads one of which you labeled conservative at like 690 or something. As you remember it went to 650 two days later. Tesla maybe be more stable than it used to be but 10% moves in a couple days are still on the table.

(but I don’t think it will either)

 

[phantasms]

When is generally the best time to roll a cc? Last week I rolled a 735 in the first two days which would have expired worthless.

This week it’s my 755s that have me a little nervous. Do I simply roll now or wait? Do options often get executed before Friday? Best to wait to be ITM or best to roll before?

Not sure why I wasn’t more cautious this week.

 

[vikings123]

This is TSLA, one of these days we’re going to get a crazy run, the big question is whether it’s already started.

All of those runs happened on higher than average volume(18 million today against a 3 month average of 21 million) plus a combination of gamma squeeze and institutional buying.

I’m not saying it cannot happen but would like to see better volume before I’m convinced.

 

[vikings123]

When is generally the best time to roll a cc? Last week I rolled a 735 in the first two days which would have expired worthless.

This week it’s my 755s that have me a little nervous. Do I simply roll now or wait? Do options often get executed before Friday? Best to wait to be ITM or best to roll before?

Not sure why I wasn’t more cautious this week.

I think it’s best to wait until Friday especially if they are OTM. MMs will do the job for you.

 

[AquaY]

Most options don‘t get exercised days early but it can happen.
Usually its better to simply sell the option instead of exercising it. Higher profit.
I was exercised on some CCs once early because I screwed up forgetting about an ex dividend date that occurred before expiration.


Its usually best to roll before they are too deep ITM
I would not roll your 755s yet.
750 is a resistance level.

I’m short some 750s and I don’t plan on rolling them yet.
That doesn’t mean I’m not looking at the rolls just so I see my options, but unless they go ITM I’ll wait.

 

[AxlxA]

https://twitter.com/x/status/1432426252258918405

 

[buttershrimp]

Isn't 200 basis points like only 2%?

Not including TSLA, just using Jim Cramer's strategy (where I first learned of it) of "establishing a baseline, then adding to a position on down days, and trimming it on up days" have allowed me to beat the S&P (over a 12 year span) by 3%. Throw in TSLA and the Buy-n-Hold strategy, and Mark Spitznagel's strategy doesn't sound like it's worth the trouble.

I hope you're not trying to sell something, because that would be going against the rules of this forum (let alone the intent of this thread)?

Mark Spitznagel in "The Dao of Capital" recommends a strategy of monthly purchasing put options 2 months out that are 0.5 delta (if 40% IV, 30% OTM ). Target is spending 0.5% on puts every month. The strategy loses small amounts of money regularly, but in times of stress it really prints. As crazy as it sounds, this strategy outperforms the S&P in the long run by 200 basis points, even if it can seemingly underperform for a while.

So it’s interesting because I got this idea from book by author that is apparently works as manager at Jim Cramer’s charitable trust /tax loophole, but he is basically discussing how hedge funds hedge market risk…. Black swans etc…. So the idea is exactly what @graphilwar talks about in that book… the thing I don’t understand is
1) how do you know when the black swan event is done so you can take advantage of those sweet insurance yolo puts?
2) to @Oil4AsphaultOnly comment, is it worth the trouble? Seems easy enough to buy yolo index puts every 2 months, but does it really protect you and is it worth the trouble? And if so, how do you know when to sell to close that yolo insurance put? This is something I figure @adiggs would want to know since he’s the only person that had an answer to the Key man risk factor and black swan Tesla drop that halts trading…. Anyway, if wasting 0.5% on yolo puts evry two months can protect an entire portfolio from catastrophic collapse, that’s awesome! buying yolo VIX calls would the other possibility, or both…. But this is a potentially useful discussion for us TSLA fantatics that think “diversification” means puts AND calls AND stock

 

[graphilwar]

So it’s interesting because I got this idea from book by author that is apparently works as manager at Jim Cramer’s charitable trust /tax loophole, but he is basically discussing how hedge funds hedge market risk…. Black swans etc…. So the idea is exactly what @graphilwar talks about in that book… the thing I don’t understand is
1) how do you know when the black swan event is done so you can take advantage of those sweet insurance yolo puts?
2) to @Oil4AsphaultOnly comment, is it worth the trouble? Seems easy enough to buy yolo index puts every 2 months, but does it really protect you and is it worth the trouble? And if so, how do you know when to sell to close that yolo insurance put? This is something I figure @adiggs would want to know since he’s the only person that had an answer to the Key man risk factor and black swan Tesla drop that halts trading…. Anyway, if wasting 0.5% on yolo puts evry two months can protect an entire portfolio from catastrophic collapse, that’s awesome! buying yolo VIX calls would the other possibility, or both…. But this is a potentially useful discussion for us TSLA fantatics that think “diversification” means puts AND calls AND stock

for example, i think if you had been holding way OTM puts in March 2020 they would have shot up in value tremendously.

that’s what you’re shooting for if you implement this strategy—there’s so much carnage going on and your normal portfolio is getting cut in half, but this tiny put position is like now 5-10% of your portfolio.

so you liquidate the put for cash (which gives you dry powder at this critical point) and begin loading up on whatever you like.

i remember being so preoccupied with a fully invested TSLA position in March 2020 and not really having any cash to load up on anything when it tanked, so just had to grit my teeth and hope to survive instead of going on the offensive.

while this method sounds good in theory, in practice i think it would be very psychologically difficult to keep going with the small losses month to month for years while you watch stocks go up and up. i actually think in practice most people would give up after a month or so of losses and do something else.

 

[Tslynk67]

My black swan strategy would be the same as March 2020, to convert shares at the bottom to LEAPS, and not to panic sell any existing calls

Of course that would assume I have some shares to sell, or some cash that's not tied-up in DITM puts

And along these lines, I'm thinking about how to structure my portfolio with some risk mitigation. The best I can come up with is selling all my $TSLA, buying DITM LEAPS for the equivalent shares and continuing to sell puts with the higher cash basis, but be a little more conservative with the strikes

 

[MrMoo]

My black swan strategy would be the same as March 2020, to convert shares at the bottom to LEAPS, and not to panic sell any existing calls

Of course that would assume I have some shares to sell, or some cash that's not tied-up in DITM puts

And along these lines, I'm thinking about how to structure my portfolio with some risk mitigation. The best I can come up with is selling all my $TSLA, buying DITM LEAPS for the equivalent shares and continuing to sell puts with the higher cash basis, but be a little more conservative with the strikes

I actually grabbed a couple of deep ITM 2023 350C's, but instead of keeping the cash on the sidelines I ended up just buying more TSLA shares lol.

Sometimes it's hard, i just can't help myself!

 

[Drezil]

https://twitter.com/x/status/1432426252258918405

View attachment 703447

Can you explain the implications to me like i am 5? ..

Is this just a 400/900 risk-reversal play? Like using the money from the 400 short puts to buy 900 calls? Or is it a 400/900 straddle?

 

[MaxPain]

Can you explain the implications to me like i am 5? ..

Is this just a 400/900 risk-reversal play? Like using the money from the 400 short puts to buy 900 calls? Or is it a 400/900 straddle?

I'm not positive, but I think he's implying there was a bunch of supply added to the market with all the sold calls and puts (900 and 400 strikes).

 

[stealthyc]

Can you explain the implications to me like i am 5? ..

Is this just a 400/900 risk-reversal play? Like using the money from the 400 short puts to buy 900 calls? Or is it a 400/900 straddle?

The tweet suggests someone bought a couple million shares of Tesla, then sold $900 calls against them as well as selling $400 puts, resulting in a position with a $600 cost basis that has thus the potential for 50% gain (capped by the $900 calls)

 

[CHGolferJim]

My black swan strategy would be the same as March 2020, to convert shares at the bottom to LEAPS, and not to panic sell any existing calls

Of course that would assume I have some shares to sell, or some cash that's not tied-up in DITM puts

And along these lines, I'm thinking about how to structure my portfolio with some risk mitigation. The best I can come up with is selling all my $TSLA, buying DITM LEAPS for the equivalent shares and continuing to sell puts with the higher cash basis, but be a little more conservative with the strikes

I had the urge to enter stop-loss orders at $840 when SP hit $900, but was “too HODL” and didn’t do it. Are automated stop-losses part of your idea to convert shares to LEAPs if SP drops? Does it matter if it’s a macro-driven drop (since overall market has been on a tear the past 15 months)?

 

[Drezil]

The tweet suggests someone bought a couple million shares of Tesla, then sold $900 calls against them as well as selling $400 puts, resulting in a position with a $600 cost basis that has thus the potential for 50% gain (capped by the $900 calls)

If i put this all together i get a thing like:

So a theta-play if the price stays above 400.

In that example i sold enough puts to offset the price of stock & covered calls completely.

This is assuming the cost-basis of the position is $550 - which is also the break-even on this position.

Seems "low risk" for the plays people do around here .. but for a conservative fund this can yield considereble upside, while also collecting theta. And noone forces you to hold until expiry.
On SP @1000 you basically have 50% max-profit & can exit and reenter on a bounceback.

Very interesting. Could be one long-running income-stream (one pop binds 80k margin for me & "only" yields max 34k after 1.5 years).

 

[Tslynk67]

I had the urge to enter stop-loss orders at $840 when SP hit $900, but was “too HODL” and didn’t do it. Are automated stop-losses part of your idea to convert shares to LEAPs if SP drops? Does it matter if it’s a macro-driven drop (since overall market has been on a tear the past 15 months)?

Good question, but hard answer as I've never set a stop-loss order, and given that at any moment in time I tend to have my shares underwriting some covered calls, it's not a likely scenario for myself

Thing is that now I'm, roughly 40% cash, 40% shares and 20% LEAPS - normally that cash baance would be considered down-side protection, but of course I'm selling puts against it every week, so it would get chewed-up in any major pull-back

I guess the way around this would be to sell much deeper OTM puts, or maybe BPS's, the risk with the latter that if you do get a drop below the short leg, due to the volumes you need to get decent revenue, the losses can be absolute

Another approach would be to only play 50% of positions weekly, but play those aggressively - the wheel, if you like...

I don't know the answer, but as many of us here now have substantial capital on the line, some kind of preservation/insurance wouldn't be such a bad idea

 

[Drezil]

Will be interesting to see, how many will stick.
We had 18k open today. I think this will increase significant tomorrow & make it an even harder wall for the MMs

Update on the 750-wall in that post: 750c OI increased from 18k yesterday to 30k today.

 

[phantasms]

After stressing about it in bed for much of last night I closed out one of my 755cc at a loss, didn't roll. Still up pretty well for the week. I didn't want to get shares called away that are currently in long term status. If the 755 hits I'll take the advice and do the wheel for the first time.

I know that I'm very small potatoes in this thread but I hope that my n00b posts can be of help to others with ~500 shares.

 

[stealthyc]

After stressing about it in bed for much of last night I closed out one of my 755cc at a loss, didn't roll. Still up pretty well for the week. I didn't want to get shares called away that are currently in long term status. If the 755 hits I'll take the advice and do the wheel for the first time.

I know that I'm very small potatoes in this thread but I hope that my n00b posts can be of help to others with ~500 shares.

The size of your potatoes doesn't matter. All the info here is applicable to any account balance.

 

[AquaY]

After stressing about it in bed for much of last night I closed out one of my 755cc at a loss, didn't roll. Still up pretty well for the week. I didn't want to get shares called away that are currently in long term status. If the 755 hits I'll take the advice and do the wheel for the first time.

I know that I'm very small potatoes in this thread but I hope that my n00b posts can be of help to others with ~500 shares.

Everyone has to make their own investment/trading decisions.
Only you can choose what you are comfortable doing. What you're willing to risk and how you are willing to risk it.
Speaking for myself reading what trades people are doing and their thoughts behind those trades is great. Whether I agree with them or not I usually get something out of their potatoes. LOL