Thanks, but I remember I didn't have permission to sell nake put/nake call before though..IBKR allows me to sell naked short calls. There is a margin requirement, which is not fixed (see screenshot). More information is here. Naked short calls scare me though - something about unlimited losses.Presumably, they would allow you to sell the shares because your covered call would be converted to a short naked call. If you have questions, I wouldn't hesitate to reach out to them. I am only speculating.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Thanks all for the learnings! I have been reading each of your posts religiously.
You are right: "give me six hours to chop down a tree and I will spend the first four sharpening the axe".
I will keep learning and building my models (especially on handling black swans AKA Talab). Tinker with non blow-up scenarios. I have been selling covered puts for the year as a start (was hoping to buy more being ITM, but stock keeps going up).
I lost about 6 weeks of gain this week. Throughout the whole ordeal, I kept coming back to this philosophy: "As an option seller, 90% of the time the money is risk free. It's the chaotic 10% that can wreck the account. My main job is to identify when it begins."
What I do is go back and look for patterns associated with huge run ups in the past. They include:
1. Positive news
2. Closing at high of day multiple days in a row
3. There's not much profit taking after the initial spike. The first wave of profit taking is the golden opportunity to close out one's positions.
Would love to hear from others on what I might have missed.
What I do is go back and look for patterns associated with huge run ups in the past. They include:
1. Positive news
2. Closing at high of day multiple days in a row
3. There's not much profit taking after the initial spike. The first wave of profit taking is the golden opportunity to close out one's positions.
Would love to hear from others on what I might have missed.
Someone mentioned how BCS they sold had no margin impact before, and I'm embarrassed to say I only just realized why just now. You have an implicit buying power for BCS backed by your shares much like a covered call in that you can sell OTM BCS with a defined risk up to the amount you would gain from your shares. For instance against my shares right now I have some -1500c (this week) as well as a number of -1250/1300c (next week) and none of that impacts my buying power. A noobish revelation, I know.
Now that we "stabilized", STO 11/5 795P since premiums went back up.
I think the sentiment changed big time with the earnings report and nobody saw the Hertz news coming. I usually don’t sell calls unless IV is high enough but still made the mistake of opening 10X 970 calls on Friday. Once I saw the premarket volume I limited my losses by quickly closing these for a 20K loss on Monday morning. I’m not a big fan of rolling. It turned out to be the right decision and I was able to recover my losses and then some.
I will just add that there is some truth to technical analysis. I kept hearing about how Tesla was primed to go on a big run because it cleared the key 780 level. We already have a huge edge over Wall Street and then if you can combine with technical analysis it just becomes a double edged sword. My two cents anyway.
i bought it 2 wks ago and am waiting for delivery; written by Curt from the other thread
corduroy
Active Member
I was so focused on babysitting my BCS -1050/1150s (still holding, no changes) that I forgot to look for income on the BPS side. Just opened some 11/5 -795/700s for $2.40. I like that these are $250 OTM and tucked in just under the 800s. Optionsprofitcalc is showing 100% chance of profit (obviously we know that is not true, but still pretty darn safe).
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Knightshade
Well-Known Member
The problem is I heard the same, tons of times in the last 6+ months, all at tons of different specific levels. But no big run till now.
Just like I've heard 20 different answers to which of the tons of different SMAs is "the important one"
Or you get 20 different trend lines depending on the precise angle someone wants to draw a line at or what date they cherry pick to start with and how much they care about slight peaks up or down being outside their line.
It's astrology. Enough people throwing crap at a wall that there'll always be some folks yelling after the fact they got it right. Next will there will be again, but likely a different person whose TA that week worked out in hindsight.
If there's was a form of TA that actually, consistently, produced predictive short term accuracy everyone would use it. At which point it'd no longer be useful.
That said- as someone else here noted- it can be of value in that something enough people believe, even if it's not true, can produce behavioral results over a long term. And certain things like golden or death crosses end up baked into some HFT algos. So it's worth being aware of, but it's not what most of its proponents claim it to be.
Sold some bull put spreads for next week:
-1000/+800
-950/+750
-895/+795
-870/+770
Small positions, only a few contracts, wide spreads..
Premiums have gone up but lots of uncertainty in the market it seems. Playing it safe and only using about 10% of my available margin. Might add more early next week.
The -p1000/+p800 is only one contract, got $17.26 for it, it's my "make me adjust" -trade.
-1000/+800
-950/+750
-895/+795
-870/+770
Small positions, only a few contracts, wide spreads..
Premiums have gone up but lots of uncertainty in the market it seems. Playing it safe and only using about 10% of my available margin. Might add more early next week.
The -p1000/+p800 is only one contract, got $17.26 for it, it's my "make me adjust" -trade.
TA for the most part is reactive not predictive. I have found a lot of value in using TA and option flows to make some short term trades. It is amazing how often TSLA bounces off key SMAs and breaks down once it cannot hold the SMAs. The concept is based on demand and supply zones which is what these SMAs and BBs signify. Stocks go from demand to supply with volume playing a key role. You also have to be pretty actively looking at the charts.
For example TSLA just held the 5 day SMA around 1036.25 on the 1 hour chart. If that support breaks we are likely to see 1026(lower BB).
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NOT-ADVICE!!
like - really.
I've been thinking about spread width and position sizing, and I've got some examples that I want to work using the option chain at this moment, with the share price at $1047. For some reason (it was a good one at the time) I'll pretend that we've sold a range of different positions all keyed on the 1100 strike put ($50 ITM right now); ugh! Let's also assume a $1M cash pile so this works as well in a retirement account as a brokerage. The specific purpose of this chosen strike is to mimic a really bad / deep ITM circumstance. Working these same numbers using a 1050 or 1000 strike put will be a LOT friendlier (so roll early!?!)
Cash Secured Put.
The 1100 strike will tie up $110k per contract, so we can sell 9 of these. We did sell 9 of these and they are now trading at 57.75 (this week) or 71.00 (next week). For this week expiration we're lined up for a 5775*9 = ~$54k loss - about 5%
Clearly this is bad - we can roll this week CSP to 1090 next week for $65 for a net credit of 7.35 and a $10 improvement in the strike. $50 ITM and we can add 1 week while improving the strike $10 (pretty awesome really).
As a bonus we retain the other management choices (the $200 wide, $100 wide, and $50 wide put spreads discussed next).
$200 wide put spread
As a starting point, we have the 900/1100 put spread expiring this week. That spread is trading at 57.75 - 1.20 = 56.55. At $20k per spread we could have sold 50 of these and we're looking at a 5665*50 = $56k*5 = $280k or so loss or around 28%.
To roll to next week we need a 56.55 credit. Next week's 900/1100 is 71 - 8.30 = 63.30. The 890/1090 is 63 - 7.70 = 55.30. A small net debit for the $10 strike improvement, or a reasonably large net credit while keeping the strikes unchanged.
Even on a $200 wide spread, getting 1/4th of the way ITM and our roll options are already getting bad, but aren't really bad. There is a credit or a strike improvement on offer.
$100 put spread
As a starting point we have the 1000/1100 put spread expiring this week. This sounds bad already! It is trading at 57.75 - 5.10 = 52.65. At $10k per spread we could have sold 100 of them (and we did). We have a $5265 * 100 = $526k loss we're looking at.
EDIT: I did this roll logic badly / wrongly. I've edited to distinguish between incremental credits and unrealized losses.
We can roll this spread to next week. The 1000/1100 is trading at 71 - 20.60 = 50.40 and the current week position is trading at 52.65. We sold 100 of these so we're looking at a 2.40 or $24k realized loss in order to delay the $500k loss that is unrealized as yet. We paid $24k for some incremental time and hoping for the share price to go up - preferably above that $1100 strike we sold.
We can get a net credit with the 1010/1110 = 79 - 23.40 = 55.60. We pick up a $3 credit or $30k (yay!) while rolling our $500k unrealized loss out a week. The extra $30k is nice, but we also worsened our position by $10. Now we need the 1110 strike to go OTM. We're also $10 further ITM with this roll. The point is that we're either paying a net debit or we're rolling to a worse strike - the position is at the midpoint, and will be getting worse using a 1 week roll. It might be that a 2 week roll will get us into the small net credit, but I suspect that it won't make a difference.
$50 put spread.
I'm not going to do the math - this would be the 1050/1100 and is pretty much all ITM, so about a $50 loss on a $50 wide spread; around $1M loss on $1M at risk. The roll option is going to be particularly bad and with the 'narrow' spread width there won't be more capital to add to improve the position. In this case you'd definitely want to have used a fraction of your margin (25%?) in order to have management choices from here. Including take the big loss (hopefully sooner than the long put going ITM) as you reduced the 100% loss to $250k by only using 1/4th of your available cash. You'll be able to run the same size position next week.
BUT. That $200 wide spread has an additional management approach available. We could cut that spread size in half and double the contracts ($100 wide spread with 100 contracts). We'll need to beat 56.55 but we have 2x the contracts to do so. So the 940/1040 is around $23 ($46). The 950/1050 is around 39-12 = $27 ($54). Almost enough - so the 960/1060 = 44-13 = 31, or $62. About a $6 credit and a $40 improvement in the strike.
Similar idea but moving down to a $50 wide spread (4x the contracts at 1/4th of the spread size).
25% loss at this moment (56.55/200). Closing right now will cost us $56.56 (I didn't do the math on this one - I'd expect a further strike improvement - maybe to the 1010 range, or about 1/2 of the first improvement).
The $100 wide spread also has this 1/2 strike / double contracts approach available but it won't be as good as we're already starting 50% ITM.
The $50 wide spread doesn't have this option available (you could drop to a $25 wide spread with another 2x the contracts...).
This is also about position sizing. How much of that $1M do we put into these positions? I did the math here assuming its all in the position. That doesn't strike me as awfully risky with the cash secured puts. They can be rolled ~forever (and I have rolled a deep ITM one of these for 5 months). None of the spreads can be rolled ~forever unless you can roll for at least a net credit, and preferably a net credit plus a strike improvement. As long as there is a strike improvement and a net credit (with no reduction in spread size), then they actually can be rolled forever The problem is that the range in which the spread can be rolled effectively is a LOT smaller than the range in which the CSP can be rolled effectively ($50 ITM vs $200 ITM from past experience with deep ITM cash secured puts - it's highly dependent on the share price and on IV).
Do we use 1/4th of the available margin for that $50 wide spread? That's 50 contracts instead of 200 - I don't know where that'll fall relative to a cash secured put, and is something to evaluate. Do we use 1/2 of the margin for the $200 wide spread? I don't know what a somewhat aggressive margin usage will be, and I know that there is all sorts of position sizing stuff that's been written. Maybe somebody has a good book for us to read on this topic
This also points to the closest to ADVICE I have here - if you're rolling a spread for time, take the maximum strike improvement you can get (subject to the net credit, or at least a really small net debit). A week or a month of no income is trivial next to the sorts of large losses that are available via spreads.
And think about what a 50% or 100% loss on these spread positions will do to your account.
like - really.
I've been thinking about spread width and position sizing, and I've got some examples that I want to work using the option chain at this moment, with the share price at $1047. For some reason (it was a good one at the time) I'll pretend that we've sold a range of different positions all keyed on the 1100 strike put ($50 ITM right now); ugh! Let's also assume a $1M cash pile so this works as well in a retirement account as a brokerage. The specific purpose of this chosen strike is to mimic a really bad / deep ITM circumstance. Working these same numbers using a 1050 or 1000 strike put will be a LOT friendlier (so roll early!?!)
Cash Secured Put.
The 1100 strike will tie up $110k per contract, so we can sell 9 of these. We did sell 9 of these and they are now trading at 57.75 (this week) or 71.00 (next week). For this week expiration we're lined up for a 5775*9 = ~$54k loss - about 5%
Clearly this is bad - we can roll this week CSP to 1090 next week for $65 for a net credit of 7.35 and a $10 improvement in the strike. $50 ITM and we can add 1 week while improving the strike $10 (pretty awesome really).
As a bonus we retain the other management choices (the $200 wide, $100 wide, and $50 wide put spreads discussed next).
$200 wide put spread
As a starting point, we have the 900/1100 put spread expiring this week. That spread is trading at 57.75 - 1.20 = 56.55. At $20k per spread we could have sold 50 of these and we're looking at a 5665*50 = $56k*5 = $280k or so loss or around 28%.
To roll to next week we need a 56.55 credit. Next week's 900/1100 is 71 - 8.30 = 63.30. The 890/1090 is 63 - 7.70 = 55.30. A small net debit for the $10 strike improvement, or a reasonably large net credit while keeping the strikes unchanged.
Even on a $200 wide spread, getting 1/4th of the way ITM and our roll options are already getting bad, but aren't really bad. There is a credit or a strike improvement on offer.
$100 put spread
As a starting point we have the 1000/1100 put spread expiring this week. This sounds bad already! It is trading at 57.75 - 5.10 = 52.65. At $10k per spread we could have sold 100 of them (and we did). We have a $5265 * 100 = $526k loss we're looking at.
EDIT: I did this roll logic badly / wrongly. I've edited to distinguish between incremental credits and unrealized losses.
We can roll this spread to next week. The 1000/1100 is trading at 71 - 20.60 = 50.40 and the current week position is trading at 52.65. We sold 100 of these so we're looking at a 2.40 or $24k realized loss in order to delay the $500k loss that is unrealized as yet. We paid $24k for some incremental time and hoping for the share price to go up - preferably above that $1100 strike we sold.
We can get a net credit with the 1010/1110 = 79 - 23.40 = 55.60. We pick up a $3 credit or $30k (yay!) while rolling our $500k unrealized loss out a week. The extra $30k is nice, but we also worsened our position by $10. Now we need the 1110 strike to go OTM. We're also $10 further ITM with this roll. The point is that we're either paying a net debit or we're rolling to a worse strike - the position is at the midpoint, and will be getting worse using a 1 week roll. It might be that a 2 week roll will get us into the small net credit, but I suspect that it won't make a difference.
$50 put spread.
I'm not going to do the math - this would be the 1050/1100 and is pretty much all ITM, so about a $50 loss on a $50 wide spread; around $1M loss on $1M at risk. The roll option is going to be particularly bad and with the 'narrow' spread width there won't be more capital to add to improve the position. In this case you'd definitely want to have used a fraction of your margin (25%?) in order to have management choices from here. Including take the big loss (hopefully sooner than the long put going ITM) as you reduced the 100% loss to $250k by only using 1/4th of your available cash. You'll be able to run the same size position next week.
BUT. That $200 wide spread has an additional management approach available. We could cut that spread size in half and double the contracts ($100 wide spread with 100 contracts). We'll need to beat 56.55 but we have 2x the contracts to do so. So the 940/1040 is around $23 ($46). The 950/1050 is around 39-12 = $27 ($54). Almost enough - so the 960/1060 = 44-13 = 31, or $62. About a $6 credit and a $40 improvement in the strike.
Similar idea but moving down to a $50 wide spread (4x the contracts at 1/4th of the spread size).
25% loss at this moment (56.55/200). Closing right now will cost us $56.56 (I didn't do the math on this one - I'd expect a further strike improvement - maybe to the 1010 range, or about 1/2 of the first improvement).
The $100 wide spread also has this 1/2 strike / double contracts approach available but it won't be as good as we're already starting 50% ITM.
The $50 wide spread doesn't have this option available (you could drop to a $25 wide spread with another 2x the contracts...).
This is also about position sizing. How much of that $1M do we put into these positions? I did the math here assuming its all in the position. That doesn't strike me as awfully risky with the cash secured puts. They can be rolled ~forever (and I have rolled a deep ITM one of these for 5 months). None of the spreads can be rolled ~forever unless you can roll for at least a net credit, and preferably a net credit plus a strike improvement. As long as there is a strike improvement and a net credit (with no reduction in spread size), then they actually can be rolled forever The problem is that the range in which the spread can be rolled effectively is a LOT smaller than the range in which the CSP can be rolled effectively ($50 ITM vs $200 ITM from past experience with deep ITM cash secured puts - it's highly dependent on the share price and on IV).
Do we use 1/4th of the available margin for that $50 wide spread? That's 50 contracts instead of 200 - I don't know where that'll fall relative to a cash secured put, and is something to evaluate. Do we use 1/2 of the margin for the $200 wide spread? I don't know what a somewhat aggressive margin usage will be, and I know that there is all sorts of position sizing stuff that's been written. Maybe somebody has a good book for us to read on this topic
This also points to the closest to ADVICE I have here - if you're rolling a spread for time, take the maximum strike improvement you can get (subject to the net credit, or at least a really small net debit). A week or a month of no income is trivial next to the sorts of large losses that are available via spreads.
And think about what a 50% or 100% loss on these spread positions will do to your account.
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Humor for the day - my accounts are on the order of 1/3rd to 1/2 cash, with the rest in stock and leaps. All of these TSLA (after all - why would I diworsify my portfolio!?!).
Fidelity looks at my asset allocation and concludes that these look most like a Conservative mix, a Balanced mix, and Short term mix. Well - at least the last one has a passing relationship with reality
Fidelity looks at my asset allocation and concludes that these look most like a Conservative mix, a Balanced mix, and Short term mix. Well - at least the last one has a passing relationship with reality
Maybe I need to start watching the option flow and being careful around good or bad news. Good video, he thinks we will drop to around $1000 on Friday and possibly trend up on Monday.
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A word of caution: in the past when TSLA reached new heights and volatility went up, many brokers raised their margin requirements. After this week’s developments that could happen again. So don’t fly too close to the sun.
pz1975
Active Member
I think it’s smart that you are starting small and very OTM. I would agree with @adiggs opinion that you would learn more and faster by using expirations that are sooner. I almost always sell options 1-2 weeks out and not beyond unless I’m rescuing a losing position. That way I feel more nimble to make changes if the SP moves against me. With yours, I would feel kind of paralyzed if the SP started going up or down fast in terms of when to close and roll. You do buy yourself more time to recover of course so your choices are fine of course, but I would personally just sell for next week at this point and stay closer to the money than you did to get some decent profit. For example, I’m eyeing $1250 CCs and $900/800 BPS for next week at this point but won’t do it until Friday.
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