I'm thinking of closing about half of my "LEAPs" (which are actually like 6 weeks out; I just keep rolling them to free up capital while maintaining higher delta) just prior to earnings, then reopening on either the dip, or IV crush. I'm not sure if I really want to do this or not, as I don't have a good handle on how much earnings will impact IV for deep ITM long calls for late Nov. I'm concerned about IV crush smushing these options once the uncertainty of earnings passes, even if the stock rises, since IV has been steadily rising on the equivalent positions since a couple of months ago.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
TheTalkingMule
Distributed Energy Enthusiast
I'm moving into this BPS world once we calm down around February and I get a feel for where this SP will settle in. So definitely not a naysayer. Just want to point out the coincidence of this conversation starting in June and the SP marching reliably from 623 to 833 in pretty much a straight line.
It will NOT be this easy for noobs like me looking to get started now with BPS or even playing both sides. The "system" espoused here is very conservative and very flexible, but folks shouldn't go into it thinking 7% a week is gonna be automatic, or IMO even remotely likely.
Historically TSLA = volatility......except for the period since June!
bkp_duke
Well-Known Member
I agree in principle with what you are saying, but I disagree with the details. If you stay far OTM, this strategy would have worked even through the drop from 900 down to the 500s, and generated those 5-10% returns per week.
Hell of a lot better than the call strategy that some have employed, like myself, which always gives me heartburn about a possible day like today.
Example - my BPS for 10/22 are 690/720 and 700/730. It would take a hell of a drop to bring those ITM. And at the time those were even more aggressive than what I really wanted to do, but I am aiming for some "catch up growth" since I am a little late to this strategy.
Plus, it's pretty rare for someone in this group to hold the positions to expiration. Most are looking forward to the next 1-2 weeks for a good, SAFE, entry point that still has decent premiums.
I am definitely NOT chasing the SP up with my BPS. I'm very content to let it go further and further away from my Short leg at 720. The higher we go, the more likely a "sell the news" event could cause big losses on BPS with a 10% drop. I'm also not rolling early into 10/29 until I've seen the fall out next Thursday and Friday. Even then, I'm probably not going to open new positions until after the following weekend and open on the following Monday, when everyone has digested the news. It may cost me some potential money on decreasing IV, but my main goal is to stay safe. There are a lot of trading weeks left in the quarter after this one.
TheTalkingMule
Distributed Energy Enthusiast
Absolutely. And I wanna make it clear my warnings are for folks at my level or lower, that's a good chunk of TMCers who wander thru here.
There's a bunch of people here who have no problem monitoring and adjusting their way out of any scenario. I just want to make sure people understand the leverage involved here and that management might get a bit beyond their comfort or skill level.
It's not often that people talk so openly about wildly successful investment strategies. Really just since it got popular on Reddit. I love it and think it's a legit sign of society improving, but mania is a thing and gambler's attraction to leverage is another. The vast vast vast majority of TSLA investors would be optimally positioned as pure hold'ers.
This is a crucial decision if trading in a taxable account, because the gains and losses per transaction are reported to the IRS in the 1099 form. I would bet it's hard to tell them your broker used FIFO incorrectly and your taxable gains due to LIFO are much lower. When I questioned my broker about this in my Roth, he was unsure he could change it retroactively. I suppose some brokers will allow you to specify which lots are being sold.
TD ameritrade has something like 5 default options you can choose like LIFO, FIFO, Highest cost basis, Lowest Tax etc. I don't remember the exact specifics. But between a trade occurring and settlement you can go and change the specific lots assigned. Once settlement happens you are locked for good.
Yeah, I messed up in not realized that my broker started doing the tracking (per federal law change) and it defaulted to FIFO. Day trading ended up burning through my long term holdings in the taxed account.
BTC my P780s for next week. Figured 60% was good enough.
The official IV measure may be dropping, but the IV on options I'm considering selling is going up. The 10/22 puts I'm looking at - the closest ATM is the 750 strike and its IV is .76. The rest are 80s and higher as we get further OTM.
NOT-ADVICE
I think I've got my big friendly move - the current 630/730 and 650/750 spreads are up just shy of 50%. That'd be a great result on its own. But I can roll the 630s up to 680 for $1 and then open 700/750s for 3.60. An extra 2.50 to decay from here going into earnings. That extra 2.50 gets the overall position close to a 10% for the week and a half.
And done - I've rolled 630/730s into 680/730s plus 700/750s. Same margin but an extra 30% or so worth of premium to decay.
I'm still hoping for an early exit, but probably on Mon/Tue next week. I'd like to enter 10/29s before earnings, under the assumption that IV will be high going into earnings, and will drop pretty significantly coming out of earnings. But I'm also pretty happy with the current position if I need to hold it until late next week.
I realize that there is strong motivation to engineer a drop in the share price, and that we might see that happen later in the day. As with the original position I opened (the 630/730s) whether that was the best or even a particularly good time to open, it WAS a position that I liked (far OTM, good premium). That is true with the updated position as well.
And there is also reason to think that the current $835ish share price IS selling into weakness
My -750/+650 oct22 bps are sitting around 50% now. these were sold wednesday 
starting to consider closing these today. otoh keeping them open is probably easy profit for next week..
decisions, decisions..
it really looks like we will climb to earnings and drop like a rock the next day, regardless of earnings..
starting to consider closing these today. otoh keeping them open is probably easy profit for next week.. decisions, decisions..
it really looks like we will climb to earnings and drop like a rock the next day, regardless of earnings..
I had this conversation with myself too. I moved 650-750 put spreads to twice as many 700-750 spreads. I bought back the 650s first and then put in an optimistic sell order for the additional 700-750 spreads. They didn’t trigger. After a while, I realized the profit from opening them at the current price was “good enough for me” and I was going to go crazy watching for a dip later in the day. So I adjusted my limit and they sold immediately. Then within 10 minutes there was a bit of a dip and the spread was 20 cents better. But I’d go crazy chasing that! I had to go for a walk and just get away from it all. I don’t see $750 going into the money before earnings, and I’m not going to beat myself up over “could have done better” when this is already a money-printing machine.
Anyway, all that was at $827, and here we’re are in the $830s now. There could still be an afternoon dip, but I’m good with it.
Yeah, E*Trade also let’s you pick LIFO or FIFO. Crucially, you can also adjust it before settlement from the Portfolio / Gains & Losses table. I have mine set to LIFO as of a few weeks ago but it messed up the lot selection when I recently bought back a long-term put and I had to manually override it to move a tax hit to next year.
Edit: One more gripe about E*Trade as long as I’m here. I got my IRA approved for limited margin and spread trading as of last Friday end of day. Then, of course, I sold a couple shares and opened put spreads! So far they’ve sent me bogus Fed Calls every day this week, asking me to deposit enough cash to cover the short put as if it was naked not a spread. Every day I message them and they talk to the margin department who determines it’s an invalid Fed Call and removes it. Then they tell me hopefully it won’t happen again. Then it does. Sheesh! Still waiting for them to clear last night’s Fed Call…
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Knightshade
Well-Known Member
My -750/+650 oct22 bps are sitting around 50% now. these were sold wednesday
decisions, decisions..
it really looks like we will climb to earnings and drop like a rock the next day, regardless of earnings..
Same.
I do plan to hang on at least through early next week.... even if there is a dip from 835ish I expect a few more days will let me close better than now... but prob close before earnings.
If it keeps slowly rising into earnings I'd almost be tempted to only close the short leg Wednesday, planning to sell the long one for more on a sell the news action Thursday.
Decided to milk these for a bit more, rolled the short strike and so new position is -p750/+p700 and doubled contracts with all the freed up margin. Seriously not-adviceMy -750/+650 oct22 bps are sitting around 50% now. these were sold wednesday
decisions, decisions..
it really looks like we will climb to earnings and drop like a rock the next day, regardless of earnings..
If this climb continues into earnings, I will look for an early exit..And oh boy, I'm glad I've stayed away from selling calls these last few weeks..
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Yashu of the youtube channel ‘hit that bid’ is interviewing a former market maker to talk max pain, stock pinning and the like today at noon PST. He will probably have it posted on his channel after. Might be some interesting info in there.
Boy, this sure is complicated in the US - I gave my accountant my trades Excel sheet and assured him it was correct
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corduroy
Active Member
Just to confirm, for this to work you had to double the number of contracts?
Finished up my positioning for next week. Mix of 615-715, 630-730 BPS. I've also observed (as many others have today) that the ones I opened 2 days ago are up around 50% already, while those opened yesterday are at 35%, those opened earlier today much less - of course.
That leads me to my obvious take from all this, which is I need to do a better job of just taking the profit on these spreads earlier than i have been. I've been waiting to see 80-90% profit, which generally means i'm closing on thurs/fri of expiration week. I need to adjust my outlook and start looking to close much more aggressively. Lots of folks on this thread have been talking about this lately, but the numbers today helped drive that home. If I had closed everything for 10/15 at 70% (ish), i would have been out wednesday and back into next week's spreads much earlier, which would already be at a much higher profit %. I could then more easily take advantage of closing them early and re-opening on a dip, or rolling them into narrower spreads for more leverage similar to what adiggs posted just above.
so more profit, and at the same time there's some risk reduction in that a spread a close and take profit from can't later reverse and become a problem.
I know this is probably obvious to most people here, but I wanted to write it out anyway - partially for myself, but also in case there are others working through the same ideas.
That leads me to my obvious take from all this, which is I need to do a better job of just taking the profit on these spreads earlier than i have been. I've been waiting to see 80-90% profit, which generally means i'm closing on thurs/fri of expiration week. I need to adjust my outlook and start looking to close much more aggressively. Lots of folks on this thread have been talking about this lately, but the numbers today helped drive that home. If I had closed everything for 10/15 at 70% (ish), i would have been out wednesday and back into next week's spreads much earlier, which would already be at a much higher profit %. I could then more easily take advantage of closing them early and re-opening on a dip, or rolling them into narrower spreads for more leverage similar to what adiggs posted just above.
so more profit, and at the same time there's some risk reduction in that a spread a close and take profit from can't later reverse and become a problem.
I know this is probably obvious to most people here, but I wanted to write it out anyway - partially for myself, but also in case there are others working through the same ideas.
I admire your cautious approach and find it wise, but you could also start with incredibly safe positions, for instance 100x 10/22 550/600 for $4600 credit http://opcalc.com/C8c
I'm not saying this is a good trade, but if you have the margin/cash sitting there doing nothing, it's an exercise in getting the feel of a BPS without sticking your neck out
He is/was the user @paydirt76. He really disliked selling premium back in the day but who knows if he is in board now. I doubt it.
Paydirt's (TSLA) Option Investing Guide
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