Wiki Selling TSLA Options - Be the House

[EV forever]

It looks like I need to be prepared for adjusting my BCS as well. I have not had to do this before so looking for some advice from the more experienced folks here. The last time I was in this situation with BCS getting close to ITM, I panic closed the position on Monday eating a big loss. If I had waited till Friday, it turned out the BCS would have been OTM and profitable.

This time around, I wont panic close

The BCS are at -c1100/+c1200. Since we ended at 1024 today, there is still some room till they start getting close to ITM. My plan is to wait until Thursday before trying to roll them out to next week. If they are OTM at that point, I will just close them out. If they are ITM, I will need to roll out to next week.

How long can I safely wait with respect to SP? I remember @adiggs mentioning that it is possible to go up to about halfway into the spread for a no debit roll to next week. So does that mean I can safely wait till SP is about 1150?

 

[generalenthu]

Quick update from my side. Today was a good day, though I was thoroughly drained at the end.

As mentioned up thread, I was not doing BCS as I didn't find the premiums attractive. Pre market I had 1x Jan 1000 covered calls. This was against 2x lots of shares, so covered calls against half of them. For more upside deltas I had 5x calendars (-Jan / + March 1000), which was a big position for me. Had this for probably 5 months. And ~4x BPS at 740/660 for this week.

The intent of this calendar position was to capitalize on theta decay as the SP slowly climbed to 1k.

Well, the market gods decide that the MS upgrade, and the Hertz deal with Tom Brady ads had to come today. The gap up worried me and I BTC the short calls at about 60$ a pop (ouch). That stung. But by noon I was super glad I pulled the rip cord. 'Monday gap ups are vicious' is a rule of thumb for me.

The next order of business was to deal with the big calendar spread. The original idea was to roll the short Jan call up and out if threatened. When I looked at the analysis, the best price to roll was about 7-8% below at 925 or so. (Learning!). So just decided to take the profits and liquidate the whole spread which took a couple of hours. The gains more than offset the cost of closing the CCs. The position was not particularly large given normal liquidity, but the bid ask spreads, especially Mar 22 calls had widened. Luckily the market gods cooperated by letting the SP hover between 990 and 1010, until I was able to close the trade. And that let me enjoy the rally rest of the afternoon. Also opened 860/760 BPS that was half the normal size and this ended up at 60% profit for the day.

Overall, glad I managed the position the way I did, but the big mistake was to underestimate the Monday after Q3 rally. The week after Q3 results was the killer week in 2019 too as i remember it. Ideally should not have had that many open CCs, but you live by the sword I guess.

Did a couple of months worth trading today. But relieved at the end of it and was a good day given the circumstances.

 

[M3Rider]

Well, I rolled. Some to 11/5 1030, some to 11/12 1050, some to 11/17 1050.
Losses would be huge otherwise.
Probably more rolling on the way.

If past is a predictor, shorts may have margin calls the next couple of days and some covering to do, which means more share purchases.
Elon please save us and sell you 12m shares already

 

[MikeC]

Why can you not roll out forever with a call spread if the stock keeps climbing? Well, the gap for the 1000/1050 had grown to $20 or so with the SP around 1000 today. So you buy back the 1000 and sell the 1050 and go shopping for higher strikes and future dates (do a roll). But now, when you try to sell the same spread, the gap in the premiums for the future dates is narrow, so you still lose a lot of money if you get the same price for the short leg because the long leg you are buying costs so much more than the one you sold. I did not appreciate this, to the degree I do now, until today.

This is a key point that I didn’t understand. I rolled 1000c twice to 1025 and then 1040, but I had to widen the spread both times. I had been under the impression I could roll for strike improvement and keep the same spread size.

It changes the risk/benefit of spreads a lot if that is not the case. Maybe rising IV was the reason for that? Also, the lack of strikes available in that range gave me very little flexibility.

 

[buttershrimp]

For those who follow my crappy predictions, I figure I’d share some price research that best mirrors the current run up.

Basically the way things have evolved around earnings, the last few days most closely model January 2020. If this holds to be true, we’d see gap up tomorrow but then consolidating. Finally as you can see, a few weeks after, we will get a fresh pandemic. Norovirus-21 anyone? This is the problem with historical research…. It’s too complicated and influenced by other things…. Still it’s nice to look for patterns of how people will act when stock price goes buck wild and price goes up “too fast”.

 

[bonk3125]

First, thanks to all the contributors on this thread. Really helps learning everyone’s trading styles, strategies, and contingency plans.

I had 745/795 bps from last week going into today’s open. Left them alone today with limit close orders for a few bucks.

I have 11/5 900cc that I had rolled from 10/29 880cc last Friday. These are in my 401k, no margin, limited or otherwise. I have enough cash in this account to roll the calls once (for now), maybe twice if I didn’t use up all my good faith violations with Fidelity yet. I have ITM leaps I can always sell if I needed more cash to roll, but will prefer to wait until the week of 11/5 or if we get a big dip to roll. Not too worried about these.

Today I opened:
845/895 bps
810/860 bps
1100/1150 bcs

I opened the BCS when SP was in 990s. I was thinking about 1050/1100 at the time too but the extra premium didn’t seem worth the loss of $50 buffer for the 1100/1150. I’m not quite yet worried about these, as I only opened half the contracts as I have BPS opened. I’ll start to worry about them once we definitely break through 1050. Closing this Friday above 1100 would be a 21% weekly gain above last Friday’s close. We’ll have to see how the next few days pan out. All my spreads are backed by cash, no margin.

Lessons learned:
- Stick to my plan. I’ve been opening BCS on wed/Thur for gravy. Got greedy today.
- Don’t try to time the top when TSLA breaks through ATH. It’s TSLA. I should know this by now.
- Letting the dust settle first may leave $ on the table, but it’ll give me better peace of mind and confidence in my trades.

 

[alterac000]

This is a key point that I didn’t understand. I rolled 1000c twice to 1025 and then 1040, but I had to widen the spread both times. I had been under the impression I could roll for strike improvement and keep the same spread size.

It changes the risk/benefit of spreads a lot if that is not the case. Maybe rising IV was the reason for that? Also, the lack of strikes available in that range gave me very little flexibility.

You are hitting on a key piece of spread rolling that I learned earlier this year on one of my failed bcs positions. When the sp moves significantly against your spread (threatens the spread) it has a detrimental effect on rolling options because the market basically prices the major swing into subsequent option premiums, essentially eliminating credit rolls at the same strikes and width sizes. I'm sure there is a fancy options term for this but best I could find was a description in a video I watched somewhere after googling why this phenomenon happens. I'll try to find it again and post when I'm less inebriated
This is why if your spread is being threatened and you're worried sp might get out of hand, it is far better to either take the loss early or find alternate ways to get out of the position. Once the sp approaches short strike and certainly after breaching, equivalent rolling options are basically gone.

 

[TheTalkingMule]

So are call premiums going to be generally good tomorrow and the rest of the week? I can't imagine how IV could remain low given the insane actual volatility.

Need to sell a small amount of shares to raise cash, but I'm gonna try to sell aggressive CCs starting maybe Wednesday if things cool down. Hoping premiums will be well above the basically nothing level we've been floating in for a while, and I can squeeze out just enough cash if those never exercise.

Thoughts and prayers to you bold traders dealing with call spreads. I literally would've just had a heart attack and died around 2pm. Watching you guys calmly roll is an inspiration. When I dip into your world.........I'm starting waaaaaasay out da money!

Good luck to all.

 

[Cherry Wine]

Overall, glad I managed the position the way I did, but the big mistake was to underestimate the Monday after Q3 rally. The week after Q3 results was the killer week in 2019 too as i remember it. Ideally should not have had that many open CCs, but you live by the sword I guess.

Good point, and something I will internalize - "give the market a few days to digest good earnings results". That Q3 result was like accelerant to the news coming out overnight, or vice versa.

I contemplated closing out my calls expiring 10/29 this past Friday afternoon to see what Monday would bring. Boy, was leaving them open an expensive mistake!

 

[generalenthu]

Another thing that occurred to me is when you are rolling a spread a second time, within a day or 2, it means that markets are fast moving. And when they move fast, the momentum and gamma causes the trend to stay put for a bit. You cannot expect immediate reversals.

So a rule of thumb when rolling a second time would be to sell less on the short leg, while buying the same amount on the long leg. At that point both IV and Delta start to hurt you if you don't do that.

As an example of you're rolling a 4x spread 2 or 3 weeks out, consider doing 3x short and 4x long. Of course you can't do that for even money likely, but consider the BPS / BCS tax to live and fight another day.

Yet another variant if you're in a more constrained IRA or such is to roll out for strike improvement, but just buy some OTM weekly calls as a catastrophe hedge.

As the old saw goes high IV is generally a sell. But if you see insane IV just hold your nose and buy. The SNAP IV example posted up thread comes to mind.

 

[Chenkers]

Weeks like this will happen again unless we stop trading. For me I think I need to rethink what I am trying to do with this strategy so I can size my position accordingly. The problem is that now I have more cash than ever and I just feel like I need to use it and always do something with it... which is bad. Today was supposed to be an awesome day, not fun..

@Chenkers I haven't see you post in a while, do you have any open trades for the week?

I've been away from TMC for a bit and so have a lot of catching up to do. The reason for my absence is that we had a significant garage fire at our place on the 17th that destroyed a lot of our possessions. The fire also nearly took out our Model 3 that was parked outside the garage (my wife drove it out past the flames). So a lot of clean up and dealing with insurance, contractors etc over the last week.

I didn't have much open this week apart from 200 x 830/860 BPS sold last Friday that are obviously doing well. Unfortunately had some orders open for $1100CC for this Friday that filled @$3, but I should be able to deal with them OK. The temptation to keep the cash rolling in is strong and I've been burnt a bit over the last couple of weeks. Thankfully I'd decided last week that I'll pull back from heavy IC and BCS trades until things settle down.

 

[BornToFly]

Looking at the options chain, the only hope for an even roll of the $50 BCS 1000/1050 (if the SP doesn't quickly drop back down) is rolling it out two weeks for a tiny increase to 1050 and a doubling of Margin requirement to a $100 spread 1050/1150 for net even. If the stock keeps climbing to 1200 in those two weeks, you will be out $10,000/spread instead of the $5000/spread you risked initially. This is assuming you aren't making any money rolling up the put spread, which I would be afraid to do right now in case we drop as fast as we climbed. So the spreads are great when the stock behaves, but they can really put you in the poor house when the SP makes big moves. So my 5% return per week on my margin was too much. Will shoot for 1%/week as others have suggested in the future.

 

[Oil4AsphaultOnly]

wow, today was a very painful lesson for me. I turned a potential $20k loss (on friday) into a $150k loss, just because I rolled a 890/1000 bcs into this week's 910/1050. I gambled that there would be a dip today that I could buy to close and lost big time. And that's the key point, is recognizing that the trade was a gamble and not basic options management. I'd been spoiled by the past few months and got spanked hard today.

No more BCS for me!

 

[ReddyLeaf]

Listening to other’s problems with BCS, comforts me that I cannot do spreads or margin in my IRAs. Definitely not gloating here, but I’m happy to have managed to make 2% on selling p950s this AM. Unfortunately, today TSLA made 12%, so I would have been much better putting the cash into shares. FYI, This was cash from my failed c905s from last week. I looked briefly at buying far ITM Jan 2024 LEAPS, but the premiums were outrageous. Selling puts seemed to be the best of a bad situation.

In other IRA accounts, I’ve still got some c800s that are in play and I’m not sure whether I’ve got enough cash to buyback/roll. Might just lose all those as well and be fully in cash and selling puts while the SP rockets away from me. Still dealing with those failed-c750s from weeks ago. Dumb dumb dumb. I’ll probably just let them go as well, and sell puts for premium.

Also, I definitely should have listened to several people’s advice to sell shares in the 500’s and convert to LEAPS. That was great advice at the time. Now, with high IV and rising SP, not the best time to buy.

Anyway, happy with the 2% and considering rolling up if the SP continues to rise. Just a bit of perspective in contrast to the past few weeks of massive options profits. When the SP rockets, there’s really nowhere to hide if selling calls. Buying calls is where the action is.

The past few days does make me wonder if that billionaire actually bought a boatload of OTM calls early (before announcing his buying), then started buying actual shares to drive the SP up over his call strikes. Interesting times.

 

[MikeC]

Question: If I have 10x BCS 11/12 1040/1200, what if I rolled half of those to BPS 11/12 1020/860 at an even trade to make a 5x iron condor? That would cut the collateral needed and total amount at risk in half, right? Of course, then I'd be exposed in both directions.

 

[Tslynk67]

Question: If I have 10x BCS 11/12 1040/1200, what if I rolled half of those to BPS 11/12 1020/860 at an even trade to make a 5x iron condor? That would cut the collateral needed and total amount at risk in half, right? Of course, then I'd be exposed in both directions.

Yeah, in principle at least one side would win

 

[jeewee3000]

Nice steady pre-market action. No drama (for now).

My sold 1050 cc's still have some hope left. Not rolling until SP were to hit 1045 or so.

 

[samppa]

This is a key point that I didn’t understand. I rolled 1000c twice to 1025 and then 1040, but I had to widen the spread both times. I had been under the impression I could roll for strike improvement and keep the same spread size.

It changes the risk/benefit of spreads a lot if that is not the case. Maybe rising IV was the reason for that? Also, the lack of strikes available in that range gave me very little flexibility.

Rising IV is the probable reason, further dated options have higher extrinsic value.

 

[samppa]

Rolled BCS 10/29 1000/1100 -> 11/5 1025/1150 -> 11/12 1040/1200 today. I'm curious why people choose to take the loss instead of just trying to roll (possibly forever)? Is it because it ties up the margin that could otherwise be used for weekly BPS?

When rolling, you are essentially closing a position gone bad for a loss, and opening a new one to cover that loss.
If the stock keeps on going against you, you are digging a deeper hole..

I took the loss (it wasn't much, a little -1100/+1300 BCS that I shouldn't have sold in the first place) because I did not see a better position I would want to roll into.

I probably panicked, but better to panick early and eat a few $k loss, than wait and hope and up with a much bigger loss.. this months I've already made more than 5x my income goal, so can afford to let go.

premarket a bit red now, maybe today I will sell some Bull Put spreads. I'm being really careful and conservative for now - if TSLA can go up 12% in one day, it sure as hell can come down as much too.. we've all seen it.

 

[InTheShadows]

Listening to other’s problems with BCS, comforts me that I cannot do spreads or margin in my IRAs. Definitely not gloating here, but I’m happy to have managed to make 2% on selling p950s this AM. Unfortunately, today TSLA made 12%, so I would have been much better putting the cash into shares. FYI, This was cash from my failed c905s from last week. I looked briefly at buying far ITM Jan 2024 LEAPS, but the premiums were outrageous. Selling puts seemed to be the best of a bad situation.

In other IRA accounts, I’ve still got some c800s that are in play and I’m not sure whether I’ve got enough cash to buyback/roll. Might just lose all those as well and be fully in cash and selling puts while the SP rockets away from me. Still dealing with those failed-c750s from weeks ago. Dumb dumb dumb. I’ll probably just let them go as well, and sell puts for premium.

Also, I definitely should have listened to several people’s advice to sell shares in the 500’s and convert to LEAPS. That was great advice at the time. Now, with high IV and rising SP, not the best time to buy.

Anyway, happy with the 2% and considering rolling up if the SP continues to rise. Just a bit of perspective in contrast to the past few weeks of massive options profits. When the SP rockets, there’s really nowhere to hide if selling calls. Buying calls is where the action is.

The past few days does make me wonder if that billionaire actually bought a boatload of OTM calls early (before announcing his buying), then started buying actual shares to drive the SP up over his call strikes. Interesting times.

I think when @DaveT interviewed him last week, he said he was out of money and needed to find some more.